Seeking Alpha

Seagate acquiring Xyratex for $13.25/share

  • Seagate (STX) is acquiring hard drive equipment/storage subsystem maker Xyratex (XRTX) for $13.25/share, or $294M if excluding $80M in cash on hand. The price represents a 27% premium to Xyratex's Friday close. (PR)
  • By acquiring Xyratex, which has counted Seagate, Western Digital (WDC), and Toshiba among its clients (the latter two might now now turn to other suppliers), Seagate is vertically integrating in an effort to gain a manufacturing edge. The purchase comes shortly after Western beat Seagate to the punch in shipping helium drives (they're lighter, denser, and more power-efficient than conventional drives), a technology long promoted by Xyratex.
  • The deal also increases Seagate's enterprise storage exposure. As SA Pro contributor Kingsley Park Capital has noted, Xyratex, historically focused on relatively low-end solutions, recently launched ClusterStor, a solution aimed at the growing, higher-margin HPC storage market.
  • Seagate expects the purchase to contribute $500M-$600M to FY15 (ends June '15) revenue, and to be neutral to FY15 EPS. The deal is expected to close by mid-2014. Activist investor Baker Street Capital, which has a large stake in Xyratex, backs the deal.
Comments (7)
  • omegabonobo
    , contributor
    Comments (175) | Send Message
     
    this is the first stock that I own that is being bought by another company - I assume I have nothing to do and they will get sold by my broker automatically, or am I expected to create a sell order ?
    23 Dec 2013, 11:54 AM Reply Like
  • SA Editor Eric Jhonsa
    , contributor
    Comments (918) | Send Message
     
    Assuming the deal closes at the current buyout price, you should automatically receive $13.25 in cash in your account for each Xyratex share you own.
    23 Dec 2013, 12:10 PM Reply Like
  • gsterling
    , contributor
    Comments (751) | Send Message
     
    Since it's selling at the purchase price (actually a couple of cents above) you can just sell now instead of waiting unless you believe someone is going to put in a higher bid for the company.

     

    Unfortunately I dumped XRTX about a month ago :-(. Oh well.
    23 Dec 2013, 12:58 PM Reply Like
  • Michael Bryant
    , contributor
    Comments (5744) | Send Message
     
    (STX) will always be around. Hard drives will always be needed. Flash drives can't handle big data, yet.
    23 Dec 2013, 02:15 PM Reply Like
  • Micah
    , contributor
    Comments (479) | Send Message
     
    Yes - and $STX plows through another 52 week high. Up 84% for 2013. This has been a good investment. Pure multiple expansion from a P/E of 4 to 12.

     

    Massive return to shareholders through stock buybacks, dividends and investing in the business through R/D and acquisitions.
    23 Dec 2013, 04:48 PM Reply Like
  • Alan13j
    , contributor
    Comments (2) | Send Message
     
    I hold Xyratex shares and have not rec'd any communication how and when will I receive the cash? as comments above will I receive automatically?
    15 Apr 2014, 09:11 PM Reply Like
  • Alan13j
    , contributor
    Comments (2) | Send Message
     
    Hold Xyratex shares and not had any communication or money in my account. What should I do?
    15 Apr 2014, 09:11 PM Reply Like
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