Western Digital Corp. has announced its friendly acquisition of component maker Komag Inc for about $1 billion in cash, in the latest move to consolidate the highly commoditised disk drive industry.

The proposed acquisition comes amidst a sharp fall in prices in the computer disk-drive industry.

Under the terms of the agreement, Western Digital will pay $32.25 a share for all of the outstanding shares of Komag, which supplies thin-film media that Western, a finished products maker, uses to make disk drives.

Western Digital plans to fund the transaction, including the expected retirement of Komag''s convertible debt due in 2014, through cash from the combined company and a senior secured term loan of up to $1.25 billion.

The transaction has been unanimously approved by both boards and is subject to regulatory approvals. It is expected to close in the third quarter.

Komag, expects a substantial operating loss in the quarter, has warned that revenue for the second quarter will be down at least 30 per cent from the first quarter

In April, rival Seagate Technology scaled back its outlook for the current quarter and year, blaming a price war over high-capacity desktop computer drives, which now store as much as about one trillion bytes of data.

The Komag deal comes four years after Western Digital acquired part of bankrupt disk drive parts maker, Read-Rite, which supplied the mechanical heads used to read data on drives.

Winchester disk drives, the basic technology used for storage in personal computers, laptops and a range of consumer electronics, was invented in Silicon Valley by International Business Machines Corp. researchers in the 1970s. IBM sold most of its own disk drive business to Hitachi Ltd. in 2003. Seagate acquired Maxtor, another of the remaining independent disk drive makers last year.