SEG going Private, VRTS to buy up SNDK, ZOOX, CVCI shares:
SCOTTS VALLEY, Calif. (CBS.MW) -- Shares of storage-drive
maker Seagate Technology and Veritas Software traded higher
Thursday after the companies disclosed a landmark $20 billion
deal to take the storage-drive maker private.
Veritas will buy back the Veritas shares and assets that Seagate
owns as part of the plan.
Seagate (SEG:
news, msgs) traded
at 70, up from its
Wednesday close 62
3/4. Veritas (VRTS:
news, msgs) shares
surged 8 1/2, or 9
1/2 percent, to 151.
Silver Lake Partners,
a private firm led by famed Silicon Valley investor Roger
McNamee, joins Seagate management and Texas Pacific
Group to form a private company to acquire Seagate's operating
businesses for approximately $2 billion in cash.
"Our stock's value was trading at a substantial discount to the
value of the assets of the company," said Steve Luczo, chief
executive of Seagate (SEG: news, msgs), which owns 33
percent of Veritas. "The board felt it had to address how to
unlock that value."
The remainder of Seagate -- 128 million shares of Veritas;
investment securities in SanDisk (SNDK: news, msgs), Gadzoox
Networks (ZOOX: news, msgs), CVC (CVCI: news, msgs) and
Dragon Systems; and cash -- will then sold to Veritas for 109.3
million newly issued shares of Veritas.
Shareholders of Seagate, which has a market value of $15
billion, will receive approximately $77.50 per share for each
share of Seagate common stock, which includes 0.47 Veritas
shares and $5 in cash, based on closing prices of March 28.
"I think this is a good transaction for all parties," said Gary
Abbott, vice president of New York investment bank Punk, Ziegel
& Co.
"This eliminates the overhang in Veritas
shares, and it recaptures some value for
Veritas shareholders. It also creates liquidity
for Seagate shareholders. The excitement is
that this is a mutually beneficial agreement
and that this is something harder and harder
to come by these days," Abbott said.
The structure of the deal negates the need
for a collar; it also allows for the tax-free
issuance of Veritas shares to Seagate
stockholders.
For Seagate holders, the deal represents a
26 percent premium above the stock's
30-day average price, the companies said.
Glen Ingalls, an associate analyst at Wit
SoundView Technology Group, noted that
Seagate has freed itself from the watchful
eyes of Wall Street.
"It's going to allow (Seagate) to look at the disk-drive industry
and formulate a strategy without having to worry about the current
quarter or the next quarter necessarily," Ingalls said. "It'll allow
them to be a little more aggressive."
Seagate executives said they don't anticipate any management
changes once the transactions close, which is expected to occur
in the calendar third quarter.
Veritas, which sold the 33 percent stake to Seagate last year,
said it expects the deal to benefit earnings immediately, adding
10 percent to earnings for the rest of 2000 and an additional 7.5
percent during 2001, company officials said in a conference call
announcing the agreement.
Scotts Valley, Calif.-based Seagate's stock is up 36 percent
since the first of the year. Also, Seagate will replace Pep
Boys as a component of the Standard & Poor's 500 Index. |
