Seagate has announced that it has entered into a definitive acquisition agreement with Xyratex Limited, which has developed a hard disk drive capital test equipment business. The agreement has Seagate acquiring all outstanding shares of Xyratex in an all-cash transaction valued at $13.25 per share, or a total of approximately $374 million.
Seagate noted on Monday that the transaction is currently expected to close in mid-calendar year 2014. The company also expects to finance the transaction from existing cash balances and the transaction is "not subject to any financing conditions."
According to Seagate, the acquisition of Xyratex will further strengthen Seagate's vertically integrated supply and manufacturing chain for disk drives, and ensure uninterrupted access to important capital equipment. Xyratex's enterprise data storage systems and high-performance computing (HPC) business will also expand Seagate's storage solutions portfolio.
Dave Mosley, President of Operations and Technology at Seagate, explains that as the average capacity per drive increases to multi-terabytes, the time to test these drives increases dramatically. Having access to Xyratex's test equipment will provide a strategic advantage over the competition.
"As a premier provider of HDD testing equipment, Xyratex is an important partner and we are excited to integrate these important capabilities which will considerably streamline our supply and manufacturing chain for our core HDD business," Mosley says. "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."
Seagate plans to operate Xyratex as a separate, standalone business.
The Register believes that Xyratex likely shopped around to Seagate rivals Western Digital and Toshiba, who both need test equipment for their disk manufacturing operations. Seagate was probably willing to pay the asking price. The site also speculates that WD and Toshiba will get new business due to OEMs being unhappy that Seagate is now competing with its own HPC array channel.