The rumored acquisition of SanDisk Corp. (NASDAQ: SNDK) by Western Digital Corp. (NASDAQ: WDC) is coming to fruition after all. What matters is that the semiconductor and storage industries are rapidly consolidating, and this is a move that merges a top drive-maker and storage maker with the world’s top independent flash memory maker.

Western Digital claims that this transaction will double its addressable market, and perhaps more important is that the merger is said to expand its participation in higher-growth technology segments. The combined Western Digital and SanDisk will bring together hard disk drives, solid-state drives, cloud data center storage and flash memory. There are also said to be over 15,000 combined patents issued or pending worldwide. This merger makes incredible sense for the companies, and now we just have to see how they will look with so much more debt on the combined balance sheet.

Note that this transaction has been approved by the boards of directors of both companies. The merger, even if the upside of the deal is not seen, absolutely blows out a prior offering from years past. A heavy degree of consolidation in memory and storage right now means that chip companies are looking to become much more powerful with much stronger pricing power ahead — as long as consumer electronics don’t keep selling for $100 to $400 (and that is a possibility).

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Wednesday’s press release shows that Western Digital’s acquisition is a combination of cash and stock, but the stated price tag of $86.50 per SanDisk share, or $19 billion, may not be quite as simple as it sounds. The price was said to be based on using a five-day volume-weighted average price (ending on October 20, 2015) of $79.60 per Western Digital share. The press release also noted the following:

If the previously announced investment in Western Digital by Unisplendour Corporation Limited closes prior to this acquisition, Western Digital will pay $85.10 per share in cash and 0.0176 shares of Western Digital common stock per share of SanDisk common stock; and if the Unisplendour transaction has not closed or has been terminated, $67.50 in cash and 0.2387 shares of Western Digital common stock per share of SanDisk common stock.

The press release confirmed that the SanDisk strategic partnership with Toshiba will remain an ongoing joint venture. As far as how the structure will look ahead, Steve Milligan will continue to serve as chief executive officer of the combined company. Sanjay Mehrotra is expected to join the Western Digital board of directors. The combined company also will remain headquartered in Irvine, Calif.

Western Digital is financing the merger with a mix of cash, new debt financing and Western Digital stock. It also expects to enter into new debt facilities totaling $18.4 billion, which includes a $1.0 billion revolving credit facility. The merger is expected to close in the third calendar quarter of 2016. It is subject to approval by SanDisk shareholders (and, in the event that the Unisplendour transaction does not close, Western Digital shareholders), and is subject to regulatory approvals and other customary closing conditions.

Milligan, CEO of Western Digital, said:

This transformational acquisition aligns with our long-term strategy to be an innovative leader in the storage industry by providing compelling, high-quality products with leading technology. The combined company will be ideally positioned to capture the growth opportunities created by the rapidly evolving storage industry. I’m excited to welcome the SanDisk team as we look to create additional value for all of our stakeholders, including our customers, shareholders and employees.

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Mehrotra, president and chief executive officer of SanDisk, said:

Western Digital is globally recognized as a leading provider of storage solutions and has a 45-year legacy of developing and manufacturing cutting-edge solutions, making the company the ideal strategic partner for SanDisk. Importantly, this combination also creates an even stronger partner for our customers. Joining forces with Western Digital will enable the combined company to offer the broadest portfolio of industry-leading, innovative storage solutions to customers across a wide range of markets and applications.

The goal of the merger is to reach full annual run-rate synergies of $500 million within 18 months after its closing. Another expectation is that the merger will be accretive to earnings per share on a non-GAAP basis within 12 months of the closure. Pending the closing of the transaction, Western Digital expects to continue paying its quarterly dividend and plans to suspend its share buyback program.

Western Digital shares were initially lower on the formal announcement, but the shares were last seen up almost 3% at $77.00. Its shares were up at $82.00 last week and have a 52-week trading range of $67.87 to $114.69.

SanDisk shares were up 2.5% at $77.11, within a 52-week range of $44.28 to $106.64. This stock was under $70 five days ago and was closer to $61.00 last week, prior to the merger leaking out.

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