RBC Analyst: We Don't Think Western Digital Will Walk Away From SanDisk

• Western Digital Corp WDC shares have been on a downward path, and have lost 41 percent since October 19.
• RBC Capital Markets’ Amit Daryanani maintained an Outperform rating for the company, with a price target of $76.
• The company may pursue the deal with SanDisk Corporation SNDK since the “long-term strategic nature” of the transaction had not changed, Daryanani stated.

Analyst Amit Daryanani pointed out that the concerns surrounding the deal between Western Digital and SanDisk deal related to NAND price erosion, MU correction, and the resignation of Unisplendour Vice Chairman & President, Qi Lian, on January 11.

The current Unis & Tsinghua Chairman, Mr. Zhao, was the one who had worked closely on the Western Digital transaction, Daryanani pointed out. He commented that Western Digital management “believes in the logic of owning HDD and NAND” and therefore “we don’t think the long-term strategic nature of this deal has changed to make WDC walk away.”

Shares of Micron Technology, Inc. MU have lost 33 percent since the announcement of the deal between Western Digital and SanDisk. Daryanani pointed out that this reflects “fears of NAND overcapacity.”

While emphasizing that there was low probability of either, the analyst mentioned two scenarios under which the deal would break:

1. CFIUS rules that Western Digital/Unis is a covered transaction or strikes the Unis Investment down
2. Western Digital has to issue more than 20 percent equity to consummate SanDisk and will need to seek shareholder approval