Hitachi rises on $4.3b sale of hard-drive unit to Western Digital

TOKYO, Mar 8 (Bloomberg): Hitachi Ltd. (6501), Japan's second-largest manufacturer by revenue, climbed to a two-year high in Tokyo trading after agreeing to sell its hard-disk drive unit to Western Digital Corp. (WDC) for about $4.3 billion. The shares advanced 1.8 per cent to 514 yen, the highest close since November 2008. The Japanese industrial group plans to sell Hitachi Global Storage Technologies for about $3.5 billion in cash and 25 million shares of Western Digital, the companies said yesterday. The sale would be Hitachi's biggest asset disposal ever as the company, saddled with more than 850 units, seeks to focus on making power plants, trains and other infrastructure. For Western Digital, the purchase would help it vault atop the shrinking market for hard drives, which are facing mounting competition from faster and smaller flash drives that store data in products such as Apple Inc. (AAPL)'s MacBook Air and iPhones. "Western Digital needed to strengthen its operations amid intensifying competition and Hitachi has been considering selling the volatile hard-disk drive business," said Yuichi Ishida, a Tokyo-based analyst at Mizuho Investors Securities Co. "The two companies probably struck the deal at the right time when both sides needed to make a move." Western Digital surged 16 per cent yesterday, the biggest gain in more than two years, while its nearest competitor, Seagate Technology Plc (STX), jumped 9 per cent on the Nasdaq Stock Market, in the biggest gain since October. The offer values Hitachi's hard-disk drive business at 3.4 times its book value as of December. By comparison, Seagate trades at 2.2 times book value and Western Digital changes hands at a multiple of 1.6. The offer amounts to about 90 per cent of the unit's annual sales. That compares with a median price of 95 per cent paid for other companies in the industry, according to Bloomberg data dating back to the last five years.