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.