Sarmad,
I disagree with your comment that a sweetened offer might bring only about $10/share. At least a legitimate sweetened offer. A legitimate offer would bring at least $25/share more, and possible more than that. These are depressed revenues and earnings that we are looking at in an extremely depressed sector. I daresay if a hostile bidder had tried to do this, management and the Board would have trotted out the boilerplate that so many investment firms have perfected to the effect of "We would be better off being an independent company." And if Veritas had proposed the same deal to them without the LBO part of it--the disk drive company remaining an independent public company, but giving all of the stock holdings and cash to Veritas but spinning off the shares left over to the stockholders, they (Seagate's board and management) would have looked at them like they were crazy, tax avoidance or not.
No, the only way this deal got done is because Messrs Perlman, Luzco and friends could make out like bandits in the process of doing the other parts of it.
As for your other question of how this will affect the other drive companies--I think it will help in the long run if the LBO group gets control. The reason it will help is because when they go to cash out, they will need a strong sector to cash out into. They will of course want to be the top dog in the sector, but they will only get top dollar if the others are selling at higher PSRs than they are now. So PSRs will rise to 1 or so at some point. A similar magic as the way Micron's shares have risen over the past few months to over the conversion price of some of their convertible debentures, despite losses and bulges in inventory and being in a crappy DRAM market.
But in the meantime, it still is a question whether the deal will get done, at least as advertised. I still believe that the LBO group can get a very good deal for themselves even if they lift their offer price by a considerable amount. That won't help much if, as you point out, Veritas craters in the meantime, but....
As usual, we'll have to wait and see what the powers that be have in store for us. Large institutional holders and the usual suspect law firms who have tangled with Seagate in the past are the keys. We'll have to see what they do. Will Fidelity be happy with this? I think Wellington still has a big stake too, though I'm not sure of that, my info on big holders is out of date, guess I should go check up on them.
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