(Adds details, analysts' quotes; updates share movement)
By Aurindom Mukherjee
Dec 23 Seagate Technology Plc said it
would buy network and storage equipment maker Xyratex Ltd
for about $374 million to strengthen its supply and
manufacturing chain for disk drives.
Xyratex shares were up 27 percent at $13.25 per share in
morning trading, matching Seagate's offer price.
The deal will help Seagate acquire testing equipment for its
hard disk drives (HDD) along with storage systems to analyze and
manage network data.
The acquisition could help Seagate maintain its gross
margins at the 27-33 percent level as it begins to own more of
the equipment that it uses, FBN Securities analyst Shebly
Seyrafi told Reuters.
Seagate and rival Western Digital Corp, which
dominate the HDD market, have been trying to expand their
presence in the faster and more energy efficient solid-state
drives market as demand slows in a declining PC market.
Seagate's deal with Xyratex could be a "complementary asset,
but not a real game-changer", Argus Research analyst Jim
Kelleher said. Seagate shares were little changed at $55.92 on
the Nasdaq on Monday.
The company said it expects the deal to close in mid-2014,
and add about $500-$600 million in revenue in its fiscal year
Allen & Co LLC was the financial adviser for Seagate, while
Wilson Sonsini Goodrich & Rosati acted as primary legal adviser.
Credit Suisse was the financial adviser and Latham & Watkins
LLP the legal adviser to Xyratex.
(Reporting by Neha Alawadhi and Aurindom Mukherjee in
Bangalore; Editing by Joyjeet Das)