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Technology Stocks : Western Digital (WDC) -- Ignore unavailable to you. Want to Upgrade?

To: Sam who wrote (8910)	3/12/1998 6:43:00 PM
From: CalculatedRisk	Read Replies (1) \| Respond to of 11057

Sam, re: Seagate & Conner. At the end of '95, Seagate paid approximately $1.825B ($1.25B in stock and assumed $575M in debt) for Conner. At the time, Conner's sales were about $2.3B per year ... and Conner was in financial trouble. As a comparison, WDC sales are about $4B and their market cap is about $1.5B (87M shares X 17 1/2 per share). If we include WDC debt, the enterprise value is $1.9B. However, since WDC just completed their debt financing, they probably still have most of the cash ... and we could exclude this from the calculation. On a PSR basis, Seagate purchased Conner at 0.79. WDC is currently selling at a PSR of 0.38. Even including the debt, WDC's PSR is .48. (IMO, PSR is a poor measure of valuation ... but we are comparing very similar companies). Of course, we need to remember that the debentures are convertible at a 25% premium to the stock price at the time of the offering or approximately $24 per share. For $400M, this translates to about 16.7 million shares or 20% dilution. On a per share basis, including dilution from the debentures, this translates to $34 per share. If there is a strategic fit (big IF), the price appears very attractive! IMO, buying stocks on a buyout rumor is a mistake! Regards, Bill