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Excess inventory amid weak demand in the memory market hit both companies hard. The two companies believe that a single entity would be better positioned to compete against rivals, like Samsung Electronics (KS:005930).
The merged entity would be 43% owned by Kioxia, 37% by Western Digital, and the rest by existing shareholders of the companies, Reuters added.
Western Digital shares are up about 3% in premarket on the Reuters story.
The planned merger is likely to attract anti-trust scrutiny, likely in the United States and China.
Activist investor Elliott Management has a stake in WDC and is pushing for changes. On the other hand, Toshiba (TYO:6502) has a 40.6% stake in Kioxia. Elliott is also a shareholder of Toshiba.
