Western Digital and Komag have entered into a definitive agreement for WD to acquire Komag for $32.25 in cash per share for a value of approximately $1 billion.

The acquisition of Komag, a leading media manufacturer, will further strengthen WD’s position as a hard drive maker by integrating media, one of the critical technology components of a hard drive.

The transaction will be structured as a cash tender offer for all the outstanding shares of Komag common stock, followed by a merger of a wholly-owned subsidiary of WD into Komag in which the remaining shareholders of Komag will receive $32.25 in cash. The transaction has been unanimously approved by the board of directors of each company and is subject to customary closing conditions, including regulatory approvals, and is expected to close in the third calendar quarter of 2007.

WD will fund the transaction, including the expected retirement of Komag’s convertible notes due 2014, through a combination of the companies’ cash and proceeds from a senior secured term loan of up to $1.25 billion.

“Following the successful integration of the Read-Rite head assets since 2003, we are very excited by the opportunity to drive incremental profitability and efficiencies in the WD business model through the full integration of Komag’s media operation. This acquisition will enable WD to optimize synergies through the integration of heads and media, secure our long-term supply of media, and sharpen our ability to deliver high quality, highly reliable and cost-effective products to our customers,” said John Coyne, WD President and CEO.

“While the primary purpose of the acquisition is strategic in terms of access to technology and supply, we expect to realize meaningful cost benefits. Those cost benefits should enable the company to achieve incremental gross margin and net margin improvements before the amortization of acquisition-related intangibles within 12 months as we integrate Komag into our operations,” stated Tim Leyden, WD’s Executive Vice President of Finance.