Seagate Technology on Wednesday said it would buy rival computer disk-drive maker Maxtor Corp for $1.9 billion in stock, aiming to cut combined costs and drive development of new products.
In the deal, which would give Seagate an estimated 42-45 percent share of the disk drive market, Maxtor shareholders will receive 0.37 shares of Seagate common stock for each Maxtor share they own.
At current prices, the transaction is worth about $7.25 a share for Maxtor investors, a premium of more than 60 percent to its closing price on Tuesday. Maxtor's stock has not traded in that range since June 2004.
Maxtor shares soared 45 percent, or $2.04, to $6.56 on the New York Stock Exchange. Seagate shares eased 1 percent, or 23 cents, to $19.37, also on NYSE.
Seagate's Chief Financial Officer Charles Pope said on a conference call that the deal would not close until the last half of 2006, given that it may take some time for an antitrust review with regulators.
"I think that at first blush it will appear that there is a significant concentration of share," he said, adding that he does not expect the companies will need to sell any businesses to get the deal through, given the cut-throat nature of the industry.
"Even after this combination there will be significant competitors out there with very large resources - both financial and technical resources," he said.
Seagate shareholders will own about 84 percent and Maxtor shareholders about 16 percent of the new combined company.