Why This Analyst Called The Western Digital–Unisplendour Deal A 'Huge Positive Landscape Altering Agreement'

Western Digital announced on Wednesday that it has agreed to accept an equity investment of $3.8 billion from China's Unisplendour at a price of $92.50 per share, representing a 33 percent premium from Western Digital's prior closing price of $69.37.

Commenting on the deal, Ananda Baruah of Brean Capital stated that the deal is "incredibly structurally positive" and represents a "landscape altering agreement."

Share Buybacks And M&A Activity Ahead?

Baruah continued that Western Digital now has "material cash flexibility" to initiate share buybacks and M&A activity. The analyst added that the company now has access to $4 billion to $4.2 billion, marking a "huge increase" from $300 million to $450 million prior to the deal announcement.

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Increased Likelihood Of MOFOM Approval

Baruah noted that the agreement with Unisplendour also increases the likelihood of MOFOM approval, which could be "so incredibly accretive" at $4.00 to its earnings per share (on a current $7.00+ normalized earnings per share).

Looking Ahead

Finally, Baruah argued that the deal sends a "strong message" to the market that tremendous value "remains unlocked" in the HDD chain given the "impressive" mechanics.

Bottom line, Western Digital is now partnering with a "very credible" Chinese partner.

Shares remain Buy rated with an unchanged $150 price target, and the stock "remains extremely attractive" at its current levels.