US-based hard disc drive giant Seagate Technology is preparing to finalise its acquisition of rival Maxtor, in what is estimated to be a $1.9 billion transaction.
The companies announced at the end of last year that they have entered into a definitive agreement, in terms of which Seagate will acquire Maxtor in an all-stock deal, leaving Seagate shareholders with about 84% of the combined entity. Maxtor shareholders will own the remaining 16%.
Maxtor is one of the world's biggest suppliers of information storage solutions, and the transaction is expected to build on Seagate's base as the premier global hard disc drive company, Seagate said in a statement.
In addition, the company believes the transaction will enable the combined group to leverage the strength of Seagate's operating scale to drive product innovation, maximise operational efficiencies and realise significant cost synergies.
While effectively removing its biggest rival from the global market, Seagate anticipates its capabilities will enable the combined company to compete more effectively as the data storage industry addresses the challenges and opportunities for significant growth.
"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," says Bill Watkins, Seagate CEO.
The transaction is expected to be at least 10% to 20% accretive to Seagate on a cash earning-per-share basis, after the first full year of combined operations, and it is envisaged the new company will achieve $300 million of annual operating expense savings after the first full year of integration.
The acquisition is expected to be completed in the second half of this year, subject to obtaining shareholder approvals and customary regulatory approvals.
Locally, Seagate and Maxtor are the market leaders in the hard disc drive space, with 30% and 22% respectively, but a good performance by Western Digital has seen this company move into third place, with 19% of the market.
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