14 DAY TRIAL // In a shopping spree performed by Chinese government-controlled companies in the US IT industry, the Unisplendour Corporation Limited managed to buy a stake of 15% shares in Western Digital. Coincidentally, or not, Unis is closely affiliated with the notorious Tsinghua Holdings that has been attempting to buy Micron for a couple of months.
Western Digital is the biggest hard disk drives manufacturer in the world, and its hard disk drives are currently found in most server applications around the world. Although being currently outpaced in disk drives development by SSD giant Samsung, its products are still the norm in many data centers so an eventual share acquisition shouldn't come cheap. And it didn't, apparently Unis decided to invest $3.775 billion in Western Digital shares, meaning that a fresh infusion of capital would definitely strengthen the American company's balance sheet, allowing it to grow and develop more advanced products.
The Chinese who simply extend their influence by throwing money left and right agreed to purchase the newly issued WD stock at a price of $92.50 per share, which is over 30% more than the price it had just a day before. Apparently, the news got into the stock market and quickly spiked the price of WD shares so the Chinese had to pull more money out of their pockets to buy that amount of stock. Nevertheless, that makes them the largest investor of the company so they will be the guys who will have the most to say in the board of directors.
Unisplendour has some major board influence, but not when it comes to the U.S. government.
Unisplendour will be able to nominate one representative in the board and will be able to vote its shares, as in the right of veto just because it bought a huge amount of WD stake, in accordance with WD's board recommendation on significant matters. Apparently, there are some serious restrictions as well since WD has major contracts with the U.S. government.Unis won't be able to participate in discussions that involve government contracts, sales or products and services, as well as national security matters.
Additionally, Unis will not have any day-to-day or operational control over Western Digital, nor will it have access to Western Digital's intellectual property and technology. These restrictions were probably imposed by CFIUS (The Committee on Foreign Investment in the United States) in order to block any effective influence the Chinese might have in WD's government contracts and plans.
Anyhow, the Chinese will have something to win following this transaction since the Chinese markets are prone to increase their hard disk and SSD drives sales. But sale numbers aren't that important for a state backed company, so the end purpose of this acquisition is more than money, something that some U.S. authorities should keep a keen eye on.