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Chinese investor pulls out of Western Digital merger

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The merger of hard drive makers Western Digital and SanDisk will proceed at a lower price following the withdrawal of a key investor.

China's Unisplendour (Unis) withdrew its offer to buy 15% of Western Digital for $3.78bn after US authorities said they would investigate the deal.

Shares of Sandisk fell almost 2% on Tuesday, while Western Digital stock fell close to 7%.

Western Digital agreed to buy its rival for $19bn (£13.5bn) in October.

Following Unis's withdrawal, the company said it would now pay $78.50 a share in cash and shares for SanDisk, down from the deal price of $86.50, valuing the offer at $15.8bn.

Steve Milligan, chief executive officer of Western Digital, said: "We continue to look forward to our transformational combination with SanDisk and capitalising on the growth opportunities ahead of us as the demand for data storage continues to increase, despite the inability to carry out the equity investment by Unis."

Pacific Crest Securities analyst Monika Garg said: "I think if you are a Western Digital shareholder, the deal makes a lot of strategic sense."

Unis pulled out after the Committee on Foreign Investment in the United States (CFIUS) said it would investigate the impact of Chinese ownership in the US computer hardware market.

The committee is an inter-agency group led by the Treasury department that investigates the impact of foreign ownership of US companies on national security.

It has investigated other Chinese purchases of US companies, including Shuanghui's purchase of pork producer Smithfield Foods, which was eventually approved.

The collapse of the Unis deal comes during a wave of Chinese takeover interest in US corporations that has already hit a record volume of $23b in announced offers this year, according to Thomson Reuters data.

That was nearly double the full-year record reached in 2013.

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