Western Digital Corp Spin-off Notes
January 18, 2024 Update
On January 3, Select Medical Holdings Corporation (SEM) announced that it plans to potentially spin-off its occupational health services business, Concentra. It is intended to be complete by late 2024 as a tax-free spin to SEM shareholders.
SEM has four main segments Critical Illness Recovery Hospital, Rehabilitation Hospital, Outpatient Rehabilitation and Concentra. The SpinCo, Concentra, operates through its medical centers and contract services provided at employer worksites delivering occupational medicine, physical therapy, veterans healthcare, and consumer health services. In 2022 , Concentra, generated $1.7BN or ~ 27% of the company’s revenue, and $332MM or ~52% of the companies adj. EBITDA.
On a consolidated basis, SEM doesn’t too interesting. It’s trading at 13x forward earnings and an EV/NTM EBITDA multiple of 9.9x. EPS is expected to grow at ~10% going forward. I will continue to dig in to determine if this transaction will unlock SOTP value.
November 23, 2023 Update
Western Digital Corp (WDC) announced on Monday October 30, that it plans to split off its flash memory business, which had been struggling with oversupply issues after merger discussions with Japan’s Kioxia stalled. The split will create two publicly traded companies, with the RemainCo retaining its traditional hard-disk drive business. The separation is targeted for the second half of 2024.
Within the announcement , WDC also stated that it aims to raise capital through the sale of $1.3BN worth of convertible bonds to refinance part of its debt due in 2024. In 2016, WDC bought SanDisk for $19BN in order to help build out it’s flash memory unit. Since the pandemic, demand for flash chips has slowed, leaving the market saturated and increasing the pressure on chipmakers to consolidate.
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