Seagate Buyout

Seagate Technology Buyout

By: Melissa Bockhold Heather Coddington Laura Duerstock Ali Wampler

March 22, 2006

TABLE OF CONTENTS

I. II. III. IV. V. Introduction……………………………………………………………………3 Assumptions…………………………………………………………………...4 History………………………………………………………………………....4 SWOT Analysis……………………………………………………………….6 The Disk Drive Industry………………………………………………………7 A. Market Share………………….…………………………………………...7 B. Competition………………………………………………………………..8 C. Marketing and Sales Structure………………………………………….....9 D. Products…………………………………………………………………..10 VI. VII. VIII. Seagate Background………………………………………………………….11 The Buyout…………………………………………………………………. 14 Problematic Issues and Recommendations…..………………………………19 A. Seagate’s Low Stock Price……………………………………………….19 B. Buyout Financing & Capital Structure......................................................20 C. Valuation of Seagate……………………………………………………..26 i. ii. iii. Company, Competition, & Industry Information……………...26 Analysis of Historical Financial Statements…………………...36 Projected Financial Statements………………………………...37

D. Needs and Concerns of VERITAS………………..……………………..41 IX. X. XI. XII. Conclusion…………………………………………………………………...42 Silver Lake Partners Interview……..………………………………………...44 Seagate Technology Interview……………………………………………….46 Works Cited………………………………………………………………….48

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I. INTRODUCTION

In 1999, Seagate Technology, Inc., decided that in order to increase their market value, they needed to make some big changes. Due to their undervalued stock price, Seagate decided to undergo a leveraged buyout (LBO) with Silver Lake Partners L.P. During this time, four main concerns arose among the parties involved: • • • • How can Seagate address the company’s low stock price? How should the buyout be financed? What should the capital structure look like? How much should investors pay to acquire Seagate’s disk drive operations? How can Seagate address VERITAS Software Corporation’s needs and concerns? After analyzing the case and talking...