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Seagate set to acquire Maxtor for $1.9 billion

Posted by iNext - 2005-12-22

LONDON — Seagate Technology LLC has agreed to acquire rival disk drive maker Maxtor Corp. in an all-stock transaction valued at approximately $1.9 billion, the companies said Wednesday.

Under the terms of the agreement, which has been unanimously approved by the boards of both companies, Maxtor shareholders will receive 0.37 shares of Seagate common stock for each Maxtor share they own. When the transaction is completed Seagate shareholders will own approximately 84 percent and Maxtor shareholders will own approximately 16 percent of the combined company. The deal is expected to close in the second half of 2006.

The combined company is expected to generate significant synergies, and the transaction is expected to be at least 10-percent accretive to Seagate on a cash EPS basis after the first full year of combined operations.

The combined company expects to achieve approximately $300 million of annual operating expense savings in connection with the transaction after the first full year of integration.

“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,” Bill Watkins, Seagate's CEO, said in a statement.

The combined company will retain the Seagate name and executive offices will be located in Scotts Valley, Calif. C.S. Park, Maxtor chairman and CEO, will become a director of Seagate when the transaction closes. Seagate's , and the principal equity investors affiliated with certain of Seagate’s Directors have committed to vote their shares in favor of the acquisition.

There is a termination fee of $300 million payable to Maxtor under certain conditions. The transaction is intended to be tax-free to Maxtor shareholders.



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