Seagate To Buy Maxtor in $1.9 Billion Stock Deal
- By Stuart J. Johnston
- December 27, 2005
Twas the week before Christmas when Seagate Technology announced plans to acquire
smaller rival Maxtor in an all stock deal worth an estimated $1.9 billion.
Both companies’ boards have unanimously approved the acquisition, according
to a joint statement issued by the companies last week. The sale is expected
to close in mid-2006.
The combined company will use the Seagate name and will be headquartered at
Seagate’s offices in Scotts Valley, Calif. In addition, Seagate’s
management team will stay in place, while Maxtor’s current chairman and
CEO, Dr. C.S. Park, will become a member of the merged firm’s board.
Under the terms of the deal, Maxtor shareholders will receive 0.37 shares of
Seagate common stock for each Maxtor share. When it closes, Seagate shareholders
will control about 84 percent of the shares, while Maxtor shareholders will
own around 16 percent, according to the companies’ statement.
Once the merger is complete and the combined company has had a year to stabilize
and sort itself out, Seagate said it expects to reap about a 10 percent to 20
percent gain in cash earnings per share over its current cash EPS. The gains
expected to come about from the combination will be partly offset by what Seagate
referred to as “revenue attrition.” However, at the same time, the
companies expect to save around $300 million annually from eliminating overlap
and simplifying supply chains.
The larger Seagate was founded in 1979 and brought in $7.6 billion in fiscal
2005. Meanwhile, Milpitas, Calif.-based Maxtor, which was founded in 1982, grossed
$2.9 in the first three quarters of fiscal 2005.
Stuart J. Johnston has covered technology, especially Microsoft, since February 1988 for InfoWorld, Computerworld, Information Week, and PC World, as well as for Enterprise Developer, XML & Web Services, and .NET magazines.