Seagate to become private company

Management-led buyout sells assets back to Veritas. Seagate executives said they don''t anticipate any management changes.

áStorage-drive maker Seagate Technology said Wednesday it's being taken private in a $20 billion landmark, three-way deal in which Veritas Software buys back the Veritas shares and assets that Seagate owns.

Silver Lake Partners, a private firm led byá 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 (VRTS: news, msgs). "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 -- is 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 Shoddiness of this sub head ...

The structure of the deal negates the need for a collar; it also allows for the issuance of Veritas shares to Seagate stockholders to be tax-free.

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 but closed down 5 7/16 to 62 3/4 Wednesday. Veritas shares shed 12 7/16 to 142 1/2, but the stock climbed to 158 in after-hours trading on the Island ECN.

Seagate shares moved to 75 on Instinet. Also propelling shares of Veritas in the after hours: News that the stock will replace Pep Boys as a component of the Standard & Poor's 500 Index.

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