China approves conditionally Western Digital's acquisition of Hitachi

The conditions would require Hitachi GST to operate independently of Western Digital for at least two years

China has approved with conditions Western Digital's planned acquisition of Hitachi Global Storage Technologies (GST), requiring that the Hitachi entity operate independently for at least two years after the acquisition.

China's Ministry of Commerce made the decision, citing concerns that the deal would weaken competition in the market, according to a ministry posting last week. If the acquisition goes through, it would make Western Digital, Seagate Technology and Toshiba the remaining main players in the world's hard disk drive (HDD) market.

Under the ministry's conditions, Hitachi GST is required to operate as its own business. This includes maintaining its production, research and development, and sales capacity. Hitachi GST must also continue using its existing production lines and product and sales teams, and not exchange sensitive information with Western Digital on prices, supplies or customers.

Two years after the conditions go into effect, Western Digital can apply to remove them. On Tuesday, Western Digital declined to comment on the ministry's decision.

Last year, Western Digital announced its acquisition of Hitachi GST for US$4.5 billion. Regulatory authorities, however, have been asking for changes to be made to the deal.

On Monday, the U.S. Federal Trade Commission said it would require Western Digital to sell off its assets used to manufacture desktop hard drives to rival Toshiba, citing that the original terms of the acquisition were anti-competitive.

Western Digital had a 23 percent share of the global HDD market in the last quarter of 2011, while its largest rival Seagate had a 38 percent share, according to IHS iSuppli. Hitachi GST had a 14 percent share.

In December, China's Ministry of Commerce also approved conditionally Seagate's acquisition of Samsung Electronics' HDD business. Under the requirements, Seagate will be required to keep the Samsung brand for its HDD products for at least one year.

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Michael Kan

IDG News Service
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