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Elliott offers $1 billion to help separate Western Digital’s Flash business

Activist investor Elliott Investment Management urged Western Digital Corp on Tuesday to separate its Flash business and offered to invest $1 billion to facilitate a sale or a spin-off of the business.

The San Jose, California-based company’s shares rose about 10% to $59.28 in trading before the bell, following Elliott’s letter to the Board.

Elliott offered over $1 billion of incremental equity capital into the Flash business, which the hedge fund believes would be worth $17 billion to $20 billion.

The investment firm said that the company’s stock price could reach over $100 per share by the end of 2023 if the division was separated.

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Western Digital, which makes hard drives, USB drives and memory cards, did not immediately respond to a request for comment.

Elliott said that the company has underperformed battling challenges of operating two different businesses as part of the same company.

“This underperformance is particularly disappointing given the Company’s great potential in both businesses,” Elliott said in a letter addressed to the company’s board.

Western Digital, a major player in the traditional storage industry, bought SanDisk Corp six years ago in a $19 billion deal to increase its ability to make flash memory storage chips used in smartphones and tablets.

Elliott said the 2016 deal “was nothing less than transformative” but none of the benefits have been realized as Western Digital has underperformed financially and strategically amid challenges of operating two different businesses.

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