- Seagate (NASDAQ:STX) is acquiring hard drive equipment/storage subsystem maker Xyratex (NASDAQ: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 (NYSE: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.