Maxtor Corp.(Nasdaq: MXTR) said Wednesday it will buy Quantum HDD (NYSE: HDD), for about 2.3 billion, prompting Maxtor to crumble 23 percent. The deal will create a company with annual sales around $6 billion and one of the strongest balance sheets of any publicly held disk drive firms, the companies said.
Shares in Maxtor were down 2.19 to 7.59. The stock had risen recently on speculation it would be a takeover target.
Maxtor will buy Quantum HDD, Quantum's Hard Disk Drive Group, in an all-stock transaction. Quantum's HDD stockholders will get 1.52 shares of Maxtor for each HDD share. Based on the current market capitalizations, that makes the deal worth about $2.3 billion.
By pooling resources, including manufacturing expertise of Quantum partner Matsushita-Kotobuki Electronics Industries, Ltd., the new company will lead in the desktop drive business, and expand into other segments like Intel-server drives, consumer electronics drives, and server appliances, the companies said. The deal should also generate better value for customers, and boost profitability, Maxtor CEO Mike Cannon said in a release.
The new company, dubbed Maxtor Corp. will be led by Cannon. At closing, on a pro forma basis, the company will have a combined ship rate of more than 50 million hard drives annually.
The new company will record special restructuring charges and expenses at the time of completion, expected to total between $120 million and $180 million. The deal is expected to boost earnings per share in early 2002, and will generate annualized cost savings of $120 million to $200 million within 18 to 24 months following its close.
Quantum's DLT & Storage Systems Group (NYSE: DSS), which is not involved in the Quantum HDD/Maxtor transaction, will operate as a legally separate, standalone company that will be known as Quantum Corp..
Stockholders of Quantum DSS, which like Quantum HDD is a tracking stock of Quantum, will receive on a one-for-one basis shares of the then-independent company, comprising all of the operations and assets of the current Quantum DLT & Storage Systems Group.
Hyundai Electronics America, a 35 percent stockholder of Maxtor, has signed an agreement to vote in favor of the transaction. The deal will be accounted for under the purchase method of accounting and is expected to close in early calendar 2001.