SCOTTS VALLEY, Calif. — Seagate Technology, which makes computer hard drives used to store data, said Wednesday it agreed to acquire rival Maxtor Corp. for about $1.9 billion in stock.
Under the terms of the agreement, Maxtor shareholders will receive .37 shares of Seagate common stock for each Maxtor share they own. Based on Seagate’s closing stock price on Tuesday, the deal values each Maxtor share at about $7.25, a 60 percent premium to Maxtor’s Tuesday closing price of $4.52 on the New York Stock Exchange.
Shares of Maxtor, which is based in Milpitas, Calif., surged $2.13, or 47 percent, to $6.65 in pre-market trading after the news. The stock has traded in a 52-week range of $3.10 to $6.68.
The merger is expected to add at least 10 percent to 20 percent to Seagate earnings on a cash basis during the first full year of integration. Also, the combined company expects to save about $300 million a year in operating expenses after the first year.
Prior to the closing, expected to occur in the second half of 2006, Seagate and Maxtor will operate as separate businesses. There is a termination fee of $300 million payable to Maxtor under certain conditions, and the deal is intended to be tax-free to Maxtor shareholders.
Seagate, based in Scotts Valley, Calif., reiterated its second-quarter outlook which calls for $2.2 billion in revenue and earnings of 53 cents to 57 cents per share, excluding stock option expensing. Its fiscal 2006 earnings outlook also remains unchanged at approximately $2 per share, excluding expensing.
Analysts surveyed by Thomson Financial anticipated a second-quarter profit of 51 cents per share, excluding charges, on sales of $2.19 billion.
© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.