Unisplendour Corporation, has pulled out of a lucrative investment deal with American digital storage manufacturer Western Digital Corp (NASDAQ:WDC).
The deal was valued at $19 billion and would have transferred a 15% stake in the hard disk maker to Unisplendour, owned by China’s Tsinghua University. Unisplendour would have invested $3.78 billion in the stock. It also included a spot on Western Digital’s board. The deal was scrapped because the Chinese firm decided to exit after the US Committee on Foreign Investment (CFIUS) announced that it would investigate the terms of the agreement.
Western Digital announced that there was no termination fee involved in the deal. The SanDisk maker is now expected to pitch a new offer to Unis, but it will involve more cash for a bigger proportion of the stock. The company revealed that the value of the deal will drop from $19 billion in the original deal to $15.78 billion. The termination of the deal comes in the wake of massive Chinese interest in US companies. Data from Thomson Reuters indicates that Chinese investment offers in the US have already reached a record $23 billion in 2016, thus almost doubling full year investment records in 2013.
Western Digital stated last year that it would revise the stake offer if the initial deal with Unis would not yield any success. SanDisk executive vice president Sumit Sadana stated that the firm was aware of a possibility that the deal would hit a brick wall. He also stated that Western Digital will provide a new offer at $78.50 per share.
If the second deal presented is satisfactory, it should come to a close before the second half of the year. Both companies have revealed that they are committed to the deal. The hard disk maker’s decision to pursue another deal came a day after Alken Asset Management, one of their shareholders, advised them that the value of the deal was too high.