Western Digital Corp and Kioxia Holdings Corp are progressing in their merger talks and have figured out a rough structure that would eventually involve a dual-listing in Japan, according to people familiar with the matter.

Under the terms being discussed, Western Digital would spin off its flash business and merge it with Kioxia, creating a publicly traded company in the US, the people said, asking not to be named because the matter is private. The company would also plan a second stock listing in Japan, they added.

Western Digital management is expected to run the combined company, the people said. 

While the companies are working toward an announcement in the next few months, the details aren’t finalised and could still change. 

Representatives for Western Digital and Kioxia declined to comment. 

In June, Western Digital announced a review of strategic alternatives following discussions with activist investor Elliott Investment Management. Bloomberg News reported this month that Western Digital and Kioxia had revived merger talks, after discussing a pairing in 2021. 

The companies, which have a joint venture that produces flash chips, have been circling each other for years and joining forces will help them take on Samsung Electronics Co, the leader in the memory industry. Combined, the two will become the world’s second-largest maker of flash memory chips that provide storage in everything from smartphones to super computers.

Western Digital rose 2.4% to close at US$38.46 in New York trading on Friday, giving the company a value of about US$12 billion.

Closely held Kioxia, backed by Bain Capital and Toshiba Corp, was spun out of Toshiba in 2018. It’s the last Japanese chipmaker capable of producing semiconductors on cutting-edge production technology. Japan has seen its lead in that vital field overtaken by South Korea and Taiwan. 

Toshiba itself is in take-private talks with a consortium led by Japan Industrial Partners Inc.

  - Bloomberg