Seagate snaps up Maxtor for $1.9bn

Seagate has announced plans to acquire long-time rival Maxtor in an all-stock transaction valued at $1.9bn.

Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, Maxtor shareholders will receive 0.37 shares of Seagate common stock for each Maxtor share they own.

When the transaction is completed, Seagate and Maxtor shareholders will own about 84 per cent and 16 per cent of the combined company, respectively.

The combination of Seagate and Maxtor is expected to maximise operational efficiencies, and realise significant cost synergies, the firms said in a statement.

Seagate estimates that the incremental revenues will generate gross margins that are in line with the high end of its stand-alone model. In addition, the combined company expects to achieve approximately $300m of annual operating expense savings in connection with the transaction after the first full year of integration.

Seagate's executive management team will continue to serve in their current roles. The combined company will retain the Seagate name and executive offices will be located in Scotts Valley, California. Maxtor CEO and chairman CS Park will become a director of Seagate upon the closing of the transaction.

The transaction is expected to be completed in the second half of 2006, subject to obtaining shareholder approvals and customary regulatory approvals.