Seagate to Acquire Xyratex for $374M

By Pedro Hernandez

Seagate is acquiring Havant, U.K.-based Xyratex Technology Limited for $13.25 per share or $374 million, the company announced on Dec. 23. The all-cash transaction is expected to close by mid-2014, pending customary approvals.

Xyratex specializes in hard disk drive (HDD) test equipment used by manufacturing. "We are the largest capital equipment supplier to the hard disk drive manufacturing industry," boasts the company's website. The company's portfolio includes "process, inspection and test equipment used in disk drive assembly and integration, disk drive head fabrication and disk drive substrate and media manufacturing," which the company offers to a shrinking pool of HDD manufacturers.

Seagate bought Samsung's HDD business in 2011 for over $1.3 billion in 2011. In 2012, Western Digital finally closed on a deal, valued at nearly $5 billion, to acquire HDD maker Hitachi Global Storage Technologies after encountering some regulatory speed bumps.

According to Seagate's Dave Mosley, president of Operations and Technology, Xyratex's tech is essential in pushing hard drive capacities higher.

Testing times stretch as "the average capacity per drive increases to multi-terabytes," said Mosley in a statement. "Therefore, access to world-class test equipment becomes an increasingly strategic capability."

Labeling Xyratex an "important partner," Seagate plans to integrate the company's equipment and technology, "which will considerably streamline our supply and manufacturing chain for our core HDD business," stated Mosley. Further, the deal ensures "uninterrupted access to important capital equipment," stated Seagate.

Xyratex also builds storage systems for high performance computing (HPC) and Big Data environments. On Nov. 19, the company debuted ClusterStor 9000, a system that delivers 60 GB per second throughput per rack, besting its predecessor, the 6000 released in 2012, by 50 percent. ClusterStor 9000 is set to ship in mid-2014.

Seagate plans maintain the ClusterStor business, although as a separate entity, said the company. "We are also pleased to acquire Xyratex’s storage systems and high-performance computing business, which provides us additional opportunities to serve our customers with a broader array of storage solutions," offered Mosley.

Xyratex CEO Ernie Sampias said in prepared remarks that the "all-cash transaction with Seagate maximizes shareholder value through an attractive premium, and also affirms the significant value that our employees have created." Seagate's offer represents a 27 percent per share premium over Xyratex stock's closing price on Dec. 20.

Pedro Hernandez is a contributing editor at InfoStor. Follow him on Twitter @ecoINSITE.

This article was originally published on December 27, 2013