Seagate and Maxtor announced they have entered into a definitive agreement under which Seagate will acquire Maxtor in an all stock transaction.
Under the terms of the agreement, which has been unanimously approved by the boards of directors 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% and Maxtor shareholders will own approximately 16% of the combined company. The value of the transaction is approximately $1.9 billion.
The combination of Seagate and Maxtor will build on Seagateâ€™s foundation as the premier global hard disc drive company. The combined company is expected to generate significant synergies, and the transaction is expected to be at least 10-20% accretive to Seagate on a cash EPS basis after the first full year of combined operations. As with other past combinations of disc drive manufacturers, revenue attrition is anticipated to result from this combination.
â€œSeagate 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,â€? said Bill Watkins, Seagate CEO. â€œWe believe this is a strategic combination that will provide value for our shareholders as well as benefits for our customers.â€?
â€œWe believe this combination offers an exciting opportunity for our two companies to come together in a transaction that maximizes value for our stockholders, through the combination of an attractive premium and through future value enhancement of the combined companyâ€™s operations,â€? said Dr. C.S. Park, Maxtor chairman and CEO. â€œTogether, 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.â€?
Seagateâ€™s executive management team will continue to serve in their current roles. The combined company will retain the Seagate name and executive offices will be located in Scotts Valley, California. Dr. Park will become a director of Seagate upon the closing of the transaction. Seagateâ€™s chairman, CEO, executive vice presidents, and the principal equity investors affiliated with certain of Seagateâ€™s Directors have committed to vote their shares in favor of the acquisition.
The transaction is expected to be completed in the second half of calendar 2006, subject to obtaining shareholder approvals and customary regulatory approvals. 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.
Prior to the closing, Seagate and Maxtor will operate as separate businesses.