Iomega Acquires Chinese Hard Drive Manufacturer

External disk storage maker Iomega on Dec. 12 announced that it will acquire ExcelStor Great Wall Technology, an $800 million hard drive manufacturer based in Shenzhen, China, through exchange of stock. No cash will change hands, Iomega President and Chief Operating Officer Tom Kampfer told eWEEK.

Iomega will issue approximately 84 million shares of common stock, representing roughly 60 percent of the market value of the company, in exchange for 100 percent of ExcelStor, Kampfer said. When the deal is completed in mid-2008, he said, $2.6 billion Great Wall Technology—which now owns 60 percent of ExcelStor—will own about 43 percent of Iomega's stock, making GWT the largest Iomega shareholder.

Great Wall is an indirect subsidiary of China Electronics Co., a $16 billion conglomerate which, in turn, is wholly owned by the Chinese government. CEC, which owns 62 percent of Great Wall, will end up with about 25 percent of Iomega through the stock trade transaction, Kampfer said.

In summary: When the deal closes, Great Wall will own 43 percent, Iomega itself 32 percent and CEC 25 percent of Iomega. The boards of directors of both Iomega and ExcelStor have unanimously approved the share purchase agreement, Kampfer said.

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ExcelStor has been supplying Iomega's highly successful REV removable disk product line since 2004, Kampfer said, among other HDD products. ExcelStor produces more than 20 million HDD-based devices per year—mostly for Iomega, although it does sell some of its own branded drives in limited numbers, Kampfer said.

"This acquisition gives Iomega, which does no business in China at this time, a wide entry into the Far East [disk storage] market," Kampfer said.

It also will give Iomega, a relatively small consumer-oriented disk storage company that has good distribution in North America and Europe, a completely new market opportunity from within the Chinese business establishment, since part of the company will be owned—if indirectly—by the Chinese government.

Upon closing of the transaction, Iomega CEO Jonathan Huberman, Kampfer and Chief Financial Officer Preston Romm will continue in their present positions. Eddie Lui, currently CEO of ExcelStor, will become executive chairman of Iomega. Iomega's worldwide corporate headquarters will remain in San Diego, Calif.

Huberman said he expects the transaction to add to the company's bottom line, and the combined company is expected to have more than $1 billion in annual revenue for 2007 and approximately 3,000 employees worldwide.

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