Following a decision by the Committee on Foreign Investment in the United States (CFIUS) to look into a deal that would see Unisplendour pick up an approximate 15 percent stake in Western Digital, Unisplendour has backed out of its proposal.
Announced in October, the original deal would have seen Unisplendour part with $3.775 billion in return for Western Digital common stock issued at $92.50 per share, along with a seat on Western Digital's board.
No termination fees would be incurred by either party, Western Digital said in its statement.
"Western Digital, Unis [Unisplendour], and Unis Union have been notified by CFIUS that it is undertaking an investigation of the proposed Unis Union investment under the Exon-Florio Amendment to the Defense Production Act, triggering a 15-day period during which either Western Digital or Unis Union may terminate the stock purchase agreement," Western Digital said.
"As a result, Unis Union has informed Western Digital that it has decided to terminate the agreement."
The Chinese datacentre storage joint venture announced last November between the two parties is still set to go ahead.
Following Unisplendour's backtracking, Western Digital said it will be changing its consideration for its merger with SanDisk.
"We believe the strategic rationale for this acquisition is even more compelling today than when we first announced it in October last year, given industry trends and strong execution by both companies," Western Digital CEO Steve Milligan said. "The alternate merger consideration continues to create significant value for both sets of shareholders, and will allow us to maintain our financial flexibility."
The company said it still expects the deal to close during the second calendar quarter of 2016, and approval has been gained from regulators in the US, the EU, Singapore, Japan, Taiwan, South Korea, and Turkey.