They partially did (those who were shareholders in SanDisk get some cash and some shares in the new company). You could view the transaction as equivalent to merging, taking on some debt, and paying a dividend with that debt - though only to the SanDisk shareholders, not the Western Digital ones. Arguably this is fairer in that SanDisk shareholders are people who believe in the SanDisk management team whereas Western Digital shareholders believe in Western Digital's management team (who will be in charge going forward), so they partially cash out the SanDisk shareholders.
In theory it costs the same either way (Modigliani–Miller). In practice debt financing is more tax-efficient, and lets you offer a variety of risk levels to financiers with different risk appetites (which in theory they could always replicate themselves with exotic option trades, but in practice they don't).