It's a big deal. The world's number one storage device manufacturerSeagate turned private last week following a complex $20 billion two-parttransaction: one, Veritas Software will buy back its 128 million shares fromSeagate and two, an investor group called Silver Lake Partners, includingSeagate management, will buy out all of Seagate's operating businessesworldwide, including the disc drives, tape drives and components, for $2billion. In an exclusive e-interview with The Financial Express'Neeraj Saxena, Seagate's Singapore-based vice-president, sales and marketing(Asia-Pacific), Don Kennedy, elaborates on the impact of the deal onSeagate. Excerpts:Is this deal to be viewed as a subtle take-over of Seagate by Veritas andSilver Lake?
The transaction is an acquisition of all Seagate assets and liabilities,excluding its Veritas holdings, other public securities and Dragon Systemsholdings, by an investment group, led by Silver Lake Partners, Seagateemployees and management. Seagate stockholders will receive approximately0.467 shares of Veritas common stock and approximately $5 cash for eachshare of Seagate common stock. Veritas will acquire the remaining assets ofSeagate, approximately 128 million shares of Veritas common stock.Subsequent to the formation of the new business, Seagate and Veritas willonce again be separate entities.
What factors were responsible for the complex fashion in which this hugetransaction was undertaken?
The main purpose of the transaction is to unlock the value of Seagate stockfor existing stockholders. As a publicly held company, this is ourobligation. However, equally important, we believe that the company will infact, be stronger under private ownership. Senior management feels sostrongly about the future of the company that they have made a significantinvestment in the new Seagate.
Our business objectives require us to operate and invest outside of theconstraints that the financial community tends to impose on a traditionaldisc drive company business model. We will now be able to act in the bestinterest of the corporation without the negative impact of quarterlyfinancial reporting requirements and the unpredictable reaction of themarkets to such reporting.
Were there any differences in opinion between the Veritas and Seagatemanagements, which expedited the transaction?
No. The Seagate Board of Directors has been exploring a variety of optionsfor unlocking the value of the company's assets, including its Veritasholdings, and feels that the proposed transaction, which includes the saleof Seagate's operating assets to the Silver Lake Partners investment groupand provides for a 26 per cent premium over the one month average Seagateshare price, achieves that goal.
When is this transaction expected to be completed?
It is expected to take approximately 90 - 120 days.
Will this deal then affect Seagate's current business interests inIndia?
The transaction will not affect Seagate's present business in India.
What will be the focus and direction of this new Seagate avtaar?
We will continue to implement advanced manufacturing technologies, driveoperational efficiencies, and position the company for growth asstorage-centric computing expands across multiple markets. We believe that,given our financial partners' long term view on value creation, we will havegreater flexibility to meet these operating and strategic objectives. Inparticular, we will continue to strengthen the core storage productsbusiness via the ongoing implementation of advanced manufacturingtechnologies and operational efficiencies and position the company forgrowth as storage-centric computing expands across markets.
What impact will the new arrangement have on Seagate's core businesses -storage products and solutions - world-wide and in India?
There shall be no change whatsoever, anywhere. Seagate's core business -disc drives, tape drives and components - will continue to operate asusual.
What will happen to Seagate's partners like Gadzoox, Dragon Systems andXIOtech?
Veritas will acquire Seagate's holdings in Dragon, SanDisk, Gadzoox, andCVCI as part of the transaction. Seagate will continue to operate XIOtech asa wholly-owned subsidiary and have no plans for a spin-off.
What will be the changes in the Seagate management team?
The new Seagate will have a new Board of Directors, but the makeup of thatboard is yet to be determined. Seagate does not anticipate any significantmanagement changes.
Does Seagate have plans to focus on new areas now?
Moving forward, Seagate will continue to be a leading supplier of storagetechnology to traditional personal storage and enterprise computing OEMs,distributors, consumer electronics OEMs, as well as a leading supplier ofbusiness intelligence software. We will continue to accelerate core businessimprovements in technology leadership, time-to-market, advancedmanufacturing, supply chain management, Six Sigma and maximize efficiency ofour assets. We will also accelerate our emerging market strategies for thestorage area network, server appliance and consumer appliance markets.
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