Western Digital sells stake to China's Tsinghua for $3.8b

Small stake but big deal

Western Digital has bagged a $3.8 billion (around £2.5 billion, or AU$5.38 billion) investment from China's Tsinghua University in what is the largest technology investment by a Chinese firm in the US.

First reported by Bloomberg, the share purchase is just the latest in a number of deals carried out by Chinese firms to exert their global influence and its thought that it will give Western Digital the added might to fund future deals.

"We think the cash infusion bolsters WDC's already strong balance sheet," Amit Daryanani, an analyst at RBC Capital Markets, said of the deal, which also gives Tsinghua a representative on Western Digital's board. The analyst went on to add that Western Digital can be expected to take bigger steps to secure mergers and acquisitions in the storage systems and flash memory sectors. Sandisk is already one of those that is being looked at as a possible target.

Breaking down the deal, Tsinghua gets a 15% stake in the US firm by purchasing newly issued shares at $92.50 (around £61, or AU$131), 33% higher than the $79.44 (around £52, or AU$112.50) price they closed at on Tuesday evening.

No review expected

Tsinghua has already made a number of moves this year including a $2.3 billion (around £1.51 billion, or AU$3.25 billion) deal to take a controlling stake in HP's local server venture and the university has even been rumoured to be interested in buying Micron Corp.

When it comes to Tsinghua's member sitting on the board, they will not be able to take part in talks that involve government contracts, sales or any other matters that are of a sensitive nature. Thanks to the fact that the deal is a minor one, the Committee on Foreign Investment in the U.S. is not expected to review it.