Western Digital 2011 Annual Report Download - page 79

impairment charges, $27 million of employee termination benefits and $4 million of contract termination and other exit
costs. Total cash expenditures related to the restructuring activities were $31 million. The asset impairment charge of
$81 million consisted of $76 million primarily related to the land, buildings, machinery and equipment at the
manufacturing facilities in Thailand and Malaysia and $5 million related to a customer relationship intangible asset
acquired from Komag. The impairment charge is based on the excess of the carrying values over the estimated fair values
of the assets. The fair values of the land, buildings, and equipment were estimated using the market approach. The
intangible asset was valued using the income approach.
During the fourth quarter of 2009, the Company sold its substrate manufacturing facility, and related assets, in
Sarawak, Malaysia for net proceeds of $29 million, resulting in a gain of $18 million. The closure and disposal of the
Company’s manufacturing facilities was to realign its manufacturing capacity with the Company’s expectations
regarding demand at that time. Total restructuring charges of $112 million, partially offset by the $18 million gain
on sale of assets, is included in restructuring and other, net within operating expenses in the accompanying consolidated
statements of income.
Note 14. Acquisitions
Planned Acquisition of Hitachi Global Storage Technologies
On March 7, 2011, the Company entered into a stock purchase agreement (the “Purchase Agreement”) with
Hitachi, Ltd. (“Hitachi”), Viviti Technologies Ltd., until recently known as Hitachi Global Storage Technologies
Holdings Pte. Ltd., a wholly owned subsidiary of Hitachi (“HGST”), and Western Digital Ireland, Ltd., an indirect
wholly owned subsidiary of the Company (“WDI”). Pursuant to the Purchase Agreement, WDI agreed to acquire all of
the issued and outstanding paid-up share capital of HGST from Hitachi. The planned acquisition is intended to result in
a more efficient and innovative customer-focused storage company, with significant operating scale, strong global talent
and the industry’s broadest product lineup backed by a rich technology portfolio. The aggregate purchase price of the
planned acquisition is estimated to be approximately $4.3 billion, due at closing, and will be funded with existing cash,
new debt, and 25 million newly issued shares of the Company’s common stock. The Purchase Agreement contains certain
termination rights for both the Company and Hitachi, including the right to terminate the Purchase Agreement if the
planned acquisition has not closed by March 7, 2012. If the planned acquisition has not closed by March 7, 2012 due to
the failure to receive any required antitrust or competition authority’s consent, approval or clearance or any action by any
certain governmental entities to prevent the planned acquisition for antitrust or competition reasons, the Company will,
concurrently with such termination, be required to pay Hitachi a fee of $250 million in cash. During 2011, the Company
incurred $17 million of expenses related to the planned acquisition of HGST which are included within selling, general
and administrative expense in the consolidated statements of income.
On March 7, 2011, in connection with the planned acquisition of HGST, the Company, WDTI and WDI entered
into a commitment letter with Bank of America, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated regarding
a new credit facility for an amount of $2.5 billion, consisting of a $500 million revolving credit facility and $2.0 billion
in term loans, to be entered into in connection with the closing of the planned acquisition (the “Senior Facility”). Since
entering into the commitment letter, Bank of America N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated led
the effort to syndicate the Senior Facility for an amount of up to $3.0 billion, consisting of a $500 million revolving
credit facility and up to $2.5 billion in term loans. As a result of such effort, the Company, WDTI and WDI have fully
negotiated definitive loan documents for the Senior Facility with the syndicate members and, subject to customary
closing conditions including completion of the acquisition in accordance with its terms, the Company, WDTI and WDI
fully expect all of these syndicate members to be part of the final lender group. In addition, the Company is required to
pay a commitment fee at the rate of 0.35%, per annum, of the aggregate unfunded amount committed to be borrowed
under the Senior Facility. For 2011, the Company incurred debt commitment fees of $2 million related to the
acquisition.
The planned acquisition of HGST is subject to several closing conditions, including the receipt of antitrust
approvals or the expiration of applicable waiting periods in certain jurisdictions. The Company has received requests for
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WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)