Seagate to go private in $20 bln Veritas deal

(story to be published in tomorrow’s issue, March 31)

Computer disk drive maker Seagate Technology Inc. on Wednesday announced a $20 billion deal that takes the company private and sells its 33 percent stake in fast-growing Veritas Software Inc. back to Veritas. Under the complex deal, Veritas, a maker of software that stores and manages digital information, acquires Seagate for cash and stock, but it sells Seagate’s operating businesses to private investors – including Seagate management – for $2 billion in cash. The arrangement allows Veritas to reclaim the 128 million of its shares that are currently owned by Seagate, while paying out only 109.3 million new shares, plus cash, for Seagate. Veritas said the deal should add to its earnings per share figures because the amount of outstanding stock will be reduced. Veritas also gains from other uses of the cash it gets for selling Seagate’s assets, plus any interest or other earnings on securities Seagate currently holds. Seagate said its stockholders would receive the equivalent of $77.50 a share for their Seagate stock, including Veritas shares and $5 in cash. The exchange ratio is 0.467 Veritas shares for each Seagate share. The deal is expected to close in the third quarter of this year. The investor group buying Seagate’s businesses is led by financier Silver Lake Partners, and it includes Seagate management and investment firm Texas Pacific Group. “I believe that becoming a private company will allow us to focus on strengthening our core storage business,” Seagate Chief Executive Steve Luczo said in a statement. Luczo added that the deal should give the new Seagate company greater flexibility for boosting its technology and making new advances in computer storage. Seagate, a Silicon Valley pioneer, has had a tumultuous time in the past two years. In July 1998, the company fired its outspoken, brash founder, Al Shugart, replacing him with Luczo as chief executive. The stock has been on a rollercoaster ride as cheap PCs wreaked havoc in the market for computer disk drives. And in recent months, there has been rampant speculation about how Seagate would boost shareholder value and what it would do with its 33 percent stake of highflying Veritas. “To me this is fabulous and allows us to focus entirely on the disk drive business instead of having our fortunes determined by what Veritas stock is doing,” Luczo said in an interview. Veritas Chief Executive Officer Mark Leslie said his company benefits by the lower number of shares outstanding and the additional cash that can be used for strategic investments. Seagate shares ended trading down 4-5/8 at $62-3/4 on the New York Stock Exchange. The news announcement came after the market’s close. Veritas shares were off 12-7/16 at 142-1/2 on the Nasdaq stock market. Silver Lake is a private equity investment firm that focuses on large investments in technology and growth companies. It has offices in New York and Menlo Park, Calif., near San Francisco. Texas Pacific is also an equity investment firm that over the past 10 years has completed over 35 transactions and invested over $3 billion in equity capital. Reuters