Seagate to acquire Samsung HDD business unit
Seagate Technology (NASDAQ: STX), a hard disk drives and storage solutions provider, and Samsung Electronics, a digital consumer electronics and information technology company, today announced that they have entered into a definitive agreement under which the two companies will expand and strengthen their strategic relationship by further aligning their respective ownership, investments and key technologies.
The combined value of the transactions and agreements is approximately $1.375 billion USD, which will be paid by Seagate to Samsung in the form of 50 percent stock and 50 percent cash. The agreement has no financing contingencies, and is subject to customary closing conditions, including review by U.S. and international regulators. The transactions are expected to close by the end of calendar year 2011
“With these agreements, we expect to achieve greater scale and deliver a broader range of innovative storage products and solutions to our customers, while facilitating our long-term relationship with Samsung,” commented Steve Luczo, Seagate chairman, president and CEO.
Under the terms of the agreement, Samsung will receive consideration consisting of 50 percent Seagate ordinary shares and 50 percent cash. Upon closing, Samsung will receive Seagate ordinary shares valued at $687.5 million (45.2 million shares, or approximately 9.6 percent ownership of Seagate, which is based on Seagate’s 30-day volume weighted average stock price prior to signing), plus $687.5 million in cash. Samsung will have a right to designate a nominee to join Seagate’s Board of Directors following closing.
As reported, major elements of the agreement include
• Samsung combining its hard disk drive (HDD) operations into Seagate
• Extending and enhancing the existing patent cross-license agreement between the companies
• A NAND flash memory supply agreement under which Samsung will provide Seagate with its market-leading semiconductor products for use in Seagate’s enterprise solid state drives (SSDs), solid state hybrid drives and other products
• A disk drive supply agreement under which Seagate will supply disk drives to Samsung for PCs, notebooks and consumer electronics
• Expanded cooperation between the companies to co-develop enterprise storage solutions
• Samsung receiving significant equity ownership in Seagate
• A shareholder agreement under which an executive of Samsung will be nominated to join Seagate’s Board of Directors.
Seagate expects these transactions and agreements to be meaningfully accretive to non-GAAP diluted earnings per share and cash flow within the first full year following the closing, and Seagate does not expect any material restructuring costs in connection with them.
“Samsung looks forward to extending our existing strategic ties with Seagate, to deliver creative technology solutions for a broad diversity of consumer, business and industrial applications,” remarked Oh-hyun, Kwon, president of the semiconductor business, Samsung Electronics.
The transactions and agreements significantly expand Seagate’s customer access in China and Southeast Asia. In addition, the mutual supply agreements enable Seagate to secure an important source of NAND flash supply as the company expands its SSD and solid state hybrid product offerings, and position Seagate to be a more significant supplier of disk drives to Samsung. The agreement also gives Samsung a significant ownership position in Seagate.
Morgan Stanley served as financial advisor and Wilson Sonsini Goodrich & Rosati, Professional served as legal advisor to Seagate in connection with the transaction. Allen & Company served as financial advisor and Paul, Hastings, Janofsky & Walker served as legal advisor to Samsung.
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