Seagate has announced the signing of a definitive agreement for the acquisition of rival company Maxtor, for a total of USD 1.9 billion.
Under the terms of the agreement, which has been unanimously approved by the board of directors of both companies, Seagate shareholders will own 84 per cent of the combined company, while Maxtor shareholders will retain the remaining 16 per cent.
Maxtor shareholders are set to receive .37 shares of Seagate common stock for each Maxtor share they own, and the transaction is expected to complete in the second half of 2006.
Dr. C.S. Park, Maxtor chairman and CEO, commented: "We 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 companyâs operations.
"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," Park added.
The combined companies expect to save USD 300 million a year in operating expenses after the first year of consolidation, generating 10-20 percent growth to Seagate earnings after the first year.
âSeagate 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," commented 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."
The two companies will continue to operate separately until the transaction, which remains subject to shareholder and customary regulatory approval, has been completed. Seagate executives will continue to service in their existing roles, and the newly combined company will retain the Seagate name.
Seagate, who currently provides hard drives for Microsoft's Xbox 360 console, has stated that its previously announced outlook of USD 2.2 billion in revenue earnings for the December quarter remains unchanged.