Seagate to buy Maxtor for $1.9 billion in stock

Hard disk drive manufacturer Seagate Technology LLC will acquire Maxtor Corp. in an all-stock transaction worth around US$1.9 billion, the companies announced Thursday.

By sharing expenditure on research and development, Seagate and Maxtor hope to expand the range of products they offer. The deal will allow the companies to operate more efficiently, and will lead to cost savings of around $300 million a year, they said.

However, history has shown that when two hard disk drive makers merge, their combined revenue also drops, the companies warned. Nevertheless, Seagate expects the deal will boost earnings per share by between 10 percent and 20 percent after the first year of joint operations, it said.

The deal, unanimously approved by the both companies' boards of directors, will give Seagate shareholders control of about 84 percent of the combined company, they said. If the transaction receives the approval of shareholders and regulators, it should close in the second half of 2006, the companies said.

Seagate's management team will remain in place, while Maxtor Chairman and Chief Executive Officer C.S. Park will become a director of Seagate when the transaction closes.