On December 21, 2005 the Boards of Seagate and Maxtor announced that they unanimously approved a definitive merger agreement under which Seagate will acquire Maxtor in an all stock transaction. The combination will build on Seagate’s foundation as the premier global hard disc drive company, providing enhanced operating scale and key resources to drive product innovation, maximize manufacturing efficiency, and realize significant cost synergies. Leveraging increased scale with Seagate’s product platform strategy, the combined company will be well-positioned to deliver to customers a more compelling, diverse set of products quickly and at more competitive prices.

Terms of the transaction are as follows:

  • Seagate will acquire all outstanding common shares of Maxtor at an exchange ratio of .37 Seagate shares for each share of Maxtor.

  • Seagate will assume Maxtor stock options as adjusted for the .37 exchange ratio.

  • Maxtor’s existing convertible debt will be assumed by Seagate with the conversion price adjusted for the .37 exchange ratio.

  • When the transaction is completed, Seagate shareholders will own approximately 84% and Maxtor shareholders will own approximately 16% of the combined company.

  • Dr. C.S. Park, chairman and CEO of Maxtor, will become a director of Seagate upon the closing of the transaction. Seagate’s chairman, CEO, executive vice presidents, and the principal equity investors affiliated with certain of Seagate’s Directors have committed to vote their shares in favor of the acquisition.

  • The combined company is expected to generate significant synergies, and we expect this transaction to be at least 10-20% accretive to Seagate on a cash EPS basis after the first full year of combined operations. As with other past combinations of disc drive manufacturers, we anticipate revenue attrition to result from this combination. Synergy estimates take into account anticipated revenue attrition. It is estimated that the incremental revenues will generate gross margins that are in line with the high end of Seagate’s stand-alone model. In addition, the combined company is expected to achieve approximately $300 million of annual operating expense savings in connection with the transaction after the first full year of integration.

  • The deal is intended to be tax free to Maxtor’s shareholders.

  • Synergies resulting from the combination are expected to generate annual pre-tax cost savings of $300 million.

  • The transaction is contingent on customary regulatory approvals, including review by the federal and European antitrust authorities, as well as approval by shareholders of both companies.

  • There is a termination fee of $300 million payable to Maxtor under certain conditions. This reflects Seagate’s commitment to the combination and confidence that the transaction will be completed.

  • The combined company will retain the Seagate name and its executive offices will continue to be in Scotts Valley, California.

  • The acquisition is expected to close in the second half of calendar 2006.




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