Hard drive vendor Seagate has confirmed that it has entered a definitive agreement to purchase rival vendor Maxtor in a US$1.9 billion stock-based transaction. Under the terms of the deal, Seagate shareholders will own 84% of the combined company with Maxtor shareholders owning the remaining 16%.
“Seagate is excited about the opportunity to achieve greater scale, reduce supply chain costs, and leverage combined R&D efforts across a broader product set. With the increased scale of the combined company, we can reduce overall product costs and provide more innovative products at more competitive prices,” said Bill Watkins, Seagate CEO. “We believe this is a strategic combination that will provide value for our shareholders as well as benefits for our customers.”
“We believe this combination offers an exciting opportunity for our two companies to come together in a transaction that maximises value for our stockholders, through the combination of an attractive premium and through future value enhancement of the combined company’s operations,” said Dr. C.S. Park, Maxtor chairman and CEO. “Together, we will leverage our combined technical resources to deliver to our customers an even more compelling and diverse set of products, and get them to market more quickly and cost effectively.”
The combined company expects to make significant savings as a result of the deal with Seagate expecting the transaction to be 10% to 20% accretive to the company on a cash EPS basis after the first full year of operations. The company expects the combined company to achieve US$300m of annual operating expense savings after the first full year of integration.
Steve Luczo, Seagate chairman, added: “Seagate’s board of directors is very enthusiastic about this unique combination and believes it will provide value for shareholders of both companies. This transaction has significant strategic and financial benefits, and the combined company will be better positioned to anticipate and serve the needs of the global customer base in the highly competitive data storage market.”
The deal is expected to close in the second half of calendar 2006 and the two companies will continue to operate as separate business up until this point. There is a termination of US$300m payable to Maxtor under certain conditions should the deal fail to close.
Follow us on
