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Thread: Corporate M&A

  1. #1

    Default Corporate M&A

    Received this piece of news from my broker.....

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    Seagate Technology has agreed to pay $1.9 billion in stock to buy rival Maxtor Corp., people familiar with the matter said.

    The transaction unites two of the biggest makers of computer disk drives, a boom-and-bust business in which Seagate has long played the role of consolidator.

    Under the deal, expected to be announced today, Seagate, of Scotts Valley, Calif., plans to swap 0.37 of a Seagate share for each share of Maxtor, which is based in nearby Milpitas, these people said. Boards of the two companies yesterday approved the transaction, which must be approved by shareholders of both companies, they added.

    The exchange ratio indicates a current value to Maxtor holders of about $7.25 a share, a 60% premium above yesterday's closing price of Maxtor shares. In 4 p.m. New York Stock Exchange composite trading yesterday, Maxtor's stock was off one cent, at $4.52. Seagate's shares traded at $19.60, up four cents, also on the Big Board.


    A Maxtor spokesman declined to comment, as did a spokesman from Seagate.

    Disk drives are in heavy demand to store data in computers and a growing array of consumer products. But competition is fierce, forcing manufacturers to keep boosting the storage capacities of their products while driving down prices.

    By acquiring Maxtor, Seagate hopes to drive a larger volume of products through its network of factories, boosting the utilization of those plants and increasing profit margins, these people said. The deal is expected to boost Seagate's earnings per share on a cash basis after the first full year of combined operations, they said, though Seagate may not retain all
    the revenue Maxtor now generates.

    Seagate is already the No. 1 hard-drive maker, accounting for about 30% of drive shipments in the second quarter of 2005, according to iSuppli Corp., a market-research firm. Maxtor, which had been No. 2 in the first quarter with 16.3% of the market, slipped to 13.5% in the second quarter; Western Digital Corp., with 17.6% of the market, edged Maxtor out for second place in that period.

    Because two of the market's largest suppliers are involved, the transaction could face government antitrust scrutiny. But the people familiar with the deal expect the companies to argue that the combination will yield cost efficiencies and other benefits to consumers.

    Seagate, founded in 1979, claims credit for introducing the first 5.25-inch hard drive, a size that helped make the technology practical for use in personal computers. The nascent market prompted the creation of dozens of disk-drive start-ups, but most of those companies have since been acquired or gone out of business.

    Seagate accounted for some of the major transactions, including the purchase of Control Data Corp.'s drive business in 1989 and Conner Peripherals Inc. in 1996
    Maxtor, founded in 1982, has had its own share of acquisitions. In April 2001, it purchased Quantum Corp.'s hard-drive operations, which helped turned the company into one of the highest-volume drive producers.

  2. #2
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    Default Re: Corporate M&A

    So is this good or bad news for Seagate stocks?

  3. #3

    Default Re: Corporate M&A

    seagate prices might tumble a bit and share prices of maxtor may cheong skyhigh.... US market starting in a couple of hours time.....

  4. #4
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    Default Re: Corporate M&A

    Like that siao liao lor.....

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