UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 29, 2016
Western Digital Corporation
(Exact Name of Registrant as Specified in its Charter)
|
|
|
|
|
Delaware
|
|
001-08703
|
|
33-0956711
|
(State or other jurisdiction
of incorporation)
|
|
(Commission
File Number)
|
|
(IRS Employer
Identification No.)
|
|
|
|
3355 Michelson Drive, Suite 100
Irvine, California
|
|
92612
|
(Address of principal executive offices)
|
|
(Zip Code)
|
(949) 672-7000
(Registrants Telephone Number, Including Area Code)
Not applicable
(Former
name or former address, if changed since last report)
Check the appropriate box below
if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
x
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
¨
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
¨
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
¨
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Item 1.01.
|
Entry into a Material Definitive Agreement
|
Senior Credit Facilities
On April 29, 2016, Western Digital Corporation, a Delaware corporation (
Western Digital
), entered into a credit agreement
(the
Senior Credit Agreement
) with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the other lenders and financial institutions party thereto, providing for approximately $9,875 million in senior
secured credit facilities (the
Senior Credit Facilities
) consisting of a $4,125 million term loan A tranche maturing five years after the effective date (the
Term Loan A Facility
), a $3,750 million term
loan B tranche maturing seven years after the effective date (the
U.S. Term Loan B Facility
), a 885 million term loan B tranche maturing seven years after the effective date (the
Euro Term Loan B Facility
and, together with the U.S. Term Loan B Facility, the
Term Loan B Facilities
) and a $1,000 million revolving credit facility maturing five years after the effective date (the
Revolving Facility
). A portion of
the revolving facility, not to exceed $200 million, is available for the issuance of letters of credit. Western Digital expects to use the proceeds of the loans under the Senior Credit Facilities to, among other things, (i) finance, in part, the
pending acquisition (the
Acquisition
) of SanDisk Corporation, a Delaware corporation (
SanDisk
), by Western Digital Technologies, Inc., a wholly-owned subsidiary of Western Digital, (ii) refinance certain
existing indebtedness of Western Digital and SanDisk and (iii) pay certain transaction costs.
The proceeds of the borrowings under the
U.S. Term Loan B Facility and the Euro Term Loan B Facility were deposited into separate segregated escrow accounts (the
Escrow Accounts
) and will be held in escrow prior to the closing of the Acquisition. The release of the
escrowed funds will be subject to the conditions set forth in the Escrow Agreement (as defined herein) (the
Escrow Release Conditions
). At the closing of the Acquisition (i) the proceeds of the borrowings under the Term Loan B
Facilities will be released from escrow (the
Escrow Release Date
) and (ii) Western Digital will draw the term loans under the Term Loan A Facility and will have the ability to borrow under the Revolving Credit Facility. If the
Escrow Release Date does not occur on or prior to the Outside Date (as defined in the Senior Credit Agreement) or if Western Digital determines that the Escrow Release Conditions cannot be satisfied (the earlier of such dates, the
Escrow
End Date
), Western Digital must prepay in full the amount of the Term Loan B Facilities funded into escrow, together with any accrued interest and fees in connection therewith.
The obligations under the Senior Credit Facilities are (and will be) unconditionally guaranteed by certain of Western Digitals existing
and subsequently acquired or organized wholly-owned, material domestic subsidiaries (the
Guarantors
), subject to certain exceptions. Prior to the satisfaction of the Escrow Release Conditions, JPMorgan Chase Bank, N.A., as
administrative agent and collateral agent for the Senior Credit Facilities, will have a perfected first-priority lien on the funds held in the Escrow Accounts on behalf of the lenders under the Term Loan B Facilities. Upon the satisfaction of the
Escrow Release Conditions, Western Digital expects that the obligations under the Senior Credit Facilities will be secured on a first-priority basis (subject to permitted liens) by a lien on substantially all the assets and properties of Western
Digital and certain of the Guarantors, including all of the capital stock held by Western Digital and such Guarantors (subject to a limitation on pledges of capital stock of foreign subsidiaries and domestic holding companies of foreign
subsidiaries, other than 65% of the voting stock of first tier entities), subject to certain exceptions.
Borrowings under the Senior
Credit Facilities, other than borrowings under the Euro Term Loan B Facility, will bear interest at an applicable margin plus a rate per annum calculated by reference to, at Western Digitals option, (1) an adjusted LIBOR rate (subject to a
0.75% floor for the U.S. Term Loan B Facility and a 0.00% floor for the Term Loan A Facility and the Revolving Facility), determined by reference to the cost of funds for U.S. dollar deposits for the interest period relevant to such borrowing,
adjusted for certain additional costs or (2) a base rate, determined by reference to the highest of (a) the prime rate of JPMorgan Chase Bank, N.A., (b) the federal funds effective rate plus one-half of 1.00% and (c) the one month adjusted LIBOR
rate plus 1.00%. The interest rate for borrowings under the Euro Term Loan B Facility will be calculated by reference to an adjusted EURIBOR rate (subject to a 0.75% floor), determined by reference to the cost of funds for Euro deposits for the
interest period relevant to such borrowing, adjusted for certain additional costs.
Borrowings under the Term Loan A Facility and the
Revolving Facility will initially bear interest, at Western Digitals option, at the adjusted LIBOR rate plus 2.00% per annum or the base rate plus 1.00%. Following the delivery of financial statements for the first full fiscal quarter after
the Escrow Release Date, the applicable margin for the borrowings under the Term Loan A Facility and Revolving Facility will range, depending on Western Digitals leverage, from 1.50% to 2.25% for LIBOR loans and from 0.50% to 1.25% for base
rate loans. Borrowings under the U.S. Term Loan B Facility bear interest at a rate per annum equal to, at Western Digitals option, either (1) the adjusted LIBOR rate plus an applicable margin of 5.50% or (2) the base rate plus an applicable
margin of 4.50%. Borrowings under the Euro Term Loan B Facility bear interest at a rate per annum equal to EURIBOR plus an applicable margin of 5.25%.
2
The Term Loan A Facility will amortize in equal quarterly installments of (i) 1.25% per quarter
during the second four full quarter period following the Escrow Release Date, (ii) 1.875% per quarter for the succeeding four quarters, (iii) 2.50% per quarter for the succeeding four quarters and (iv) 5% per quarter for the succeeding three
quarters, with the remaining balance payable on the date that is five years after the effective date. Commencing from the first full quarter following the Escrow Release Date, the U.S. Term Loan B Facility and the Euro Term Loan B Facility will each
amortize in equal quarterly installments equal to 0.25% of the original principal amount thereof, with the balance payable on the date that is seven years after the effective date.
The Revolving Facility is initially subject to a 0.30% per annum commitment fee, subject to step-downs to 0.20% and 0.25% and a step-up to
0.35% based on Western Digitals total leverage ratio. In addition, under the Senior Credit Agreement, Western Digital will pay a nonrefundable ticking fee of 0.50% per annum on the amount of the aggregate commitments in effect under the Term
Loan A Facility and the Revolving Facility from January 7, 2016 until the earlier of (x) the Escrow Release Date and (y) the Escrow End Date.
The Senior Credit Agreement has incremental facility capacity available from and after the Escrow Release Date in an aggregate amount of $750
million, subject to certain conditions, including a specified senior secured leverage ratio. Once Western Digitals senior secured leverage ratio is below a certain threshold, incremental facilities may be utilized in an unlimited amount from
and after the Escrow Release Date.
From and after the Escrow Release Date, Western Digital will be required to maintain a minimum fixed
charge coverage ratio and a maximum total leverage ratio with respect to the Term Loan A Facility and the Revolving Facility.
Subject to
certain exceptions and thresholds, from and after the Escrow Release Date the Term Loan A Facility and Term Loan B Facilities will also require mandatory prepayments in connection with (i) excess cash flow, (ii) non-ordinary course asset sales and
other dispositions and (iii) the issuance of certain debt obligations, among other things. In addition, the Term Loan B Facilities require Western Digital to make a mandatory repayment if more than $100 million in aggregate principal amount of
SanDisks convertible notes due 2017 and 2020 remain outstanding on the date that is 90 days after the Escrow Release Date in an amount equal to the outstanding amount of such convertible notes. Subject to certain conditions and exceptions,
Western Digital is permitted to make voluntary prepayments of the loans under the Senior Credit Facilities and to reduce the existing loan commitments at any time without premium or penalty, except that the Term Loan B Facilities require Western
Digital to pay a 1.00% prepayment fee if the loans thereunder are repaid in connection with certain repricing transactions on or before the one year anniversary of the effective date.
The Senior Credit Agreement contains customary representations and warranties and affirmative covenants applicable to Western Digital and
certain of its subsidiaries and also contains certain restrictive covenants applicable from and after the Escrow Release Date, including, among others, limitations on the incurrence of additional debt, liens on property, acquisitions and
investments, loans and guarantees, mergers, consolidations, liquidations and dissolutions, asset sales, dividends and other payments in respect of Western Digitals capital stock, prepayments of certain debt, transactions with affiliates and
certain modifications of organizational documents and certain debt agreements. The Senior Credit Agreement also contains customary events of default and if and for so long as an event of default has occurred and is continuing, any amounts
outstanding under the Senior Credit Agreement will accrue interest at rate that is 2.00% above the otherwise applicable interest rate.
The foregoing description of the Senior Credit Facilities is not intended to be complete and is qualified in its entirety by reference to the
full text of the Senior Credit Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference, and the Guaranty Agreement, a copy of which is attached hereto as Exhibit 10.2 and incorporated herein by reference.
Escrow Agreement
On April 29, 2016,
Western Digital entered into an escrow agreement related to the Senior Credit Facilities (the
Escrow Agreement
) with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent under the Senior Credit Facilities, and
SunTrust Bank, as escrow agent and securities intermediary. Pursuant to the Escrow Agreement, Western Digital deposited the gross proceeds of the Term Loan B Facilities less any upfront fees and/or OID into the Escrow Accounts. The release of the
escrowed funds will be conditioned on the consummation of the Acquisition and other conditions set forth in the Escrow Agreement and the Senior Credit Agreement.
3
The above description of the Escrow Agreement is qualified in its entirety by reference to the
complete text of the Escrow Agreement, a copy of which is attached hereto as Exhibit 10.3 and incorporated herein by reference.
Certain Relationships
Certain of the lenders and banks and financial institutions party to the Senior Credit Agreement and their respective affiliates are
full service financial institutions and have in the past engaged, and may in the future engage, in transactions with and perform services, including securities trading, commercial and investment banking, financial advisory, investment management,
investment research, principal investment, hedging, financing and brokerage activities, for Western Digital and its affiliates in the ordinary course of business for which they have received or will receive customary fees and expenses. In addition,
certain of the lenders, banks and/or financial institutions party to the Senior Credit Agreement and/or their respective affiliates acted as initial purchasers in connection with Western Digitals offerings of its 7.375% Senior Secured Notes
due 2023 and its 10.500% Senior Unsecured Notes due 2024 and will receive customary fees and expenses in connection therewith. In addition, certain of the lenders, banks and/or financial institutions party to the Senior Credit Agreement and/or their
respective affiliates are lenders and/or agents under Western Digitals existing credit agreement, the indebtedness outstanding under which will be repaid in connection with the Acquisition and as such will receive a portion of the net proceeds
from the Senior Credit Facilities used to repay such credit facility. In addition, certain of the lenders, banks and/or financial institutions party to the Senior Credit Agreement and/or their respective affiliates are serving as financial advisors
to Western Digital in connection with the Acquisition, for which they will receive customary fees.
Item 2.03 Creation of a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
The information set forth under Item 1.01 above
regarding the Senior Credit Facilities is incorporated herein by reference.
Forward-Looking Statements
This document contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include,
but are not limited to, statements regarding Western Digitals proposed merger with SanDisk (including financing of the proposed transaction and the benefits, results, effects and timing of a transaction), all statements regarding Western
Digitals (and Western Digitals and SanDisks combined) expected future financial position, results of operations, cash flows, dividends, financing plans, business strategy, budgets, capital expenditures, competitive positions,
growth opportunities, plans and objectives of management, and statements containing the use of forward-looking words, such as may, will, could, would, should, project,
believe, anticipate, expect, estimate, continue, potential, plan, forecast, approximate, intend, upside, and the
like, or the use of future tense. Statements contained herein concerning the business outlook or future economic performance, anticipated profitability, revenues, expenses, dividends or other financial items, and product or services line growth of
Western Digital (and the combined businesses of Western Digital and SanDisk), together with other statements that are not historical facts, are forward-looking statements that are estimates reflecting the best judgment of Western Digital based upon
currently available information. Statements concerning current conditions may also be forward-looking if they imply a continuation of current conditions.
Such forward-looking statements are inherently uncertain, and shareholders and other potential investors must recognize that actual results
may differ materially from Western Digitals expectations as a result of a variety of factors, including, without limitation, those discussed below. These forward-looking statements are based upon managements current expectations and
include known and unknown risks, uncertainties and other factors, many of which Western Digital is unable to predict or control, that may cause actual results, performance or plans to differ materially from those expressed or implied by such
forward-looking statements, including: volatility in global economic conditions; business conditions and growth in the storage ecosystem; pricing trends and fluctuations in average selling prices; the availability and cost of commodity materials and
specialized product components; actions by competitors; unexpected advances in competing technologies; the development and introduction of products based on new technologies and expansion into new data storage markets; and other risks and
uncertainties listed in the Companys filings with the Securities and Exchange Commission (the SEC), including Western Digitals most recent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K. You should not place undue reliance on these forward-looking statements, which speak only as of the date hereof, and Western Digital undertakes no obligation to update these forward-looking statements to reflect new information or
events.
Risks and uncertainties related to the proposed merger include, but are not limited to, potential adverse reactions or changes to
business relationships resulting from the announcement, pendency or completion of the merger, uncertainties as to the timing of the merger, the possibility that the closing conditions to the proposed merger may not be satisfied or waived, including
that a governmental entity may prohibit, delay or refuse to grant a necessary approval, adverse effects on Western Digitals stock price resulting from the announcement or completion of the merger, competitive responses to the announcement or
completion of the
4
merger, costs and difficulties related to the integration of SanDisks businesses and operations with Western Digitals businesses and operations, the inability to obtain, or delays in
obtaining, cost savings and synergies from the merger, uncertainties as to whether the completion of the merger or any transaction will have the accretive effect on Western Digitals earnings or cash flows that it expects, unexpected costs,
liabilities, charges or expenses resulting from the merger, litigation relating to the merger, the inability to retain key personnel, and any changes in general economic and/or industry-specific conditions. In addition to the factors set forth
above, other factors that may affect Western Digitals or SanDisks plans, results or stock price are set forth in Western Digitals and SanDisks respective filings with the SEC, including Western Digitals and
SanDisks most recent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and Western Digitals most recent registration statement on Form S-4 referenced below. Many of these factors are beyond
Western Digitals and SanDisks control. Western Digital and SanDisk caution investors that any forward-looking statements made by Western Digital or SanDisk are not guarantees of future performance. Neither Western Digital nor SanDisk
intend, or undertake any obligation, to publish revised forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.
Important Additional Information and Where to find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities. In connection with the proposed
merger, Western Digital filed a registration statement on Form S-4 with the SEC on December 11, 2015, as amended by Amendment No. 1, dated January 27, 2016 and by Amendment No. 2, dated February 5, 2016, which was declared effective by the SEC on
February 5, 2016, and Western Digital filed the definitive proxy statement/prospectus on February 5, 2016. Western Digital and SanDisk began to mail the definitive joint proxy statement/prospectus to their respective shareholders on February 5,
2016. This material is not a substitute for the joint proxy statement/prospectus or registration statement or for any other document that Western Digital or SanDisk may file with the SEC and send to Western Digitals and/or SanDisks
shareholders in connection with the proposed merger. INVESTORS AND SECURITY HOLDERS OF WESTERN DIGITAL AND SANDISK ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE JOINT PROXY STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Investors and security holders will be able to obtain copies of the joint proxy statement/prospectus as well as other filings containing information about Western Digital and SanDisk, without charge,
at the SECs website, http://www.sec.gov. Copies of the documents filed with the SEC by Western Digital will be available free of charge on Western Digitals website at http://www.wdc.com. Copies of the documents filed with the SEC by
SanDisk will be available free of charge on SanDisks website at http://www.sandisk.com.
Item 9.01.
|
Financial Statements and Exhibits
|
(d)
Exhibits
|
|
|
Exhibit
No.
|
|
Description
|
|
|
10.1
|
|
Loan Agreement dated as of April 29, 2016, by and among Western Digital Corporation, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the lenders and financial institutions from time to time party
thereto.
|
|
|
10.2
|
|
Guaranty Agreement dated as of April 29, 2016, by and among Western Digital Corporation, the subsidiary guarantors party thereto and JPMorgan Chase Bank, N.A. as administrative agent for the guaranteed creditors.
|
|
|
10.3
|
|
Escrow Agreement dated as of April 29, 2016, by and among Western Digital, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and SunTrust Bank, as escrow agent and securities intermediary.
|
5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
Western Digital Corporation
|
|
|
|
|
Date: April 29, 2016
|
|
|
|
By:
|
|
/s/ Michael C.
Ray
|
|
|
|
|
|
|
Michael C. Ray
|
|
|
|
|
|
|
Executive Vice President, Chief Legal Officer
and Secretary
|
6
Sandisk (NASDAQ:SNDK)
Historical Stock Chart
From Mar 2024 to Apr 2024
Sandisk (NASDAQ:SNDK)
Historical Stock Chart
From Apr 2023 to Apr 2024