December 08, 2000, 5:10 PM — U.S. storage management company Veritas Software Corp. is partnering with a private
investment group in a complex deal to buy hard disk drive maker Seagate Technology Inc.
for about $20 billion in stock and cash.
This represents an about-face of sorts for both Seagate and Veritas, and it shows
how complex business operations can become as the stock valuations of high-technology
companies become a bouncing ball. Seagate sold a large part of its various software
businesses to Veritas in 1998 for $1.5 billion in stock. Steve Luczo, then head of
Seagate's software business became president and CEO of Seagate later that year, when
the company's board sacked company founder Al Shugart, a colorful and influential
storage-industry pioneer. The value of Seagate's Veritas holdings have come to exceed
the value of Seagate's disk drive operations in the interim. This created pressure
among Seagate stock holders to break out the companies' stock portfolio in some way.
The disk drive industry has had difficult times of late, but Scotts Valley, Calif.-
based Seagate is considered a relatively healthy member of that group.
Headed by Silver Lake Partners, the investor group behind the deal includes Seagate
management and Texas Pacific Group. The companies said that, once the purchase is
final, the new owners of Seagate will divide the assets between themselves.
Most importantly for Veritas, the company will be able to reclaim 33 percent
ownership, or about 128 million shares in Veritas stock previously owned by Seagate,
the companies said.
According to the companies, the transaction is expected to close by the third
quarter of this year. Just prior to the closing of the transaction between Veritas and
Seagate, Seagate executives and the investment group will pay $2 billion in cash for
Seagate's four business lines.
Stock analysts are still likely mulling the deal. The value established for the disk
drive business is considered low by some. An anticipated buyback, or privatization of
Seagate, would remove it from the quarter-by-quarter profitably growth mandates of
today's high-tech companies, yet Seagate's Luczo did not rule out taking the company
public again in the future.