Samsung and Seagate expand their strategic alliance to include hard drive technologies and NAND flash memory.
Seagate Technology, a provider of hard
disk drives and storage solutions, and Samsung Electronics, a manufacturer of
digital consumer electronics and information technology, announced that they
have entered into an agreement under which Seagate and Samsung will
"significantly expand and strengthen their strategic relationship" by further
aligning their respective ownership, investments and key technologies.
The combined value of these
transactions and agreements is approximately $1.375 billion, which will be paid
by Seagate to Samsung in the form of 50 percent stock and 50 percent cash.
Major elements of the agreement include
Samsung combining its HDD (hard disk drive) operations into Seagate, extending
and enhancing the existing patent cross-license agreement between the companies,
and a NAND flash memory supply agreement under which Samsung will provide
Seagate with its semiconductor products for use in Seagate's enterprise SSDs
(solid-state drives), solid-state hybrid drives and other products.
Other aspects of the agreement include
a disk drive supply agreement under which Seagate will supply disk drives to
Samsung for PCs, notebooks and consumer electronics; expanded cooperation
between the companies to co-develop enterprise storage solutions; Samsung
receiving equity ownership in Seagate; and a shareholder agreement under which
an executive of Samsung will be nominated to join Seagate's board of directors.
In a joint statement, the two companies
said the transactions and related strategic agreements will enable both
companies to better align their current and future product development efforts
and road maps, accelerate time-to-market for new products, and position the
companies to better address rapidly evolving opportunities in markets
including, but not limited to, mobile computing, cloud computing and solid-state
In connection with its strategic
alliance with Samsung, Seagate expects also to strengthen its relationship with
TDK Corporation/SAE Magnetics (H.K.) Ltd.
Together, these transactions and
agreements broaden a strategic relationship between Seagate and Samsung that
began with a joint development agreement announced in August 2010. Seagate said
it expects these transactions and agreements to be accretive to non-GAAP
diluted earnings per share and cash flow within the first full year following
the closing, and does not expect any material restructuring costs in connection
"We are pleased to strengthen our
strategic relationship with Samsung in a way that better aligns both companies
around technologies and products," said Steve Luczo, Seagate chairman,
president and CEO. "With these agreements, we expect to achieve greater scale
and deliver a broader range of innovative storage products and solutions to our
customers, while facilitating our long-term relationship with Samsung."
Under the terms of the agreement,
Samsung will receive consideration consisting of 50 percent of Seagate ordinary
shares and 50 percent cash. Upon closing, Samsung will receive Seagate ordinary
shares valued at $687.5 million (45.2 million shares, or approximately 9.6
percent ownership of Seagate, which is based on Seagate's 30-day volume
weighted average stock price prior to signing), plus $687.5 million in cash.
Samsung will have the right to designate a nominee to join Seagate's board of directors
The transactions and agreements also
expand Seagate's customer access in China and Southeast Asia. In addition, the
mutual supply agreements enable Seagate to secure a source of NAND flash supply
as the company expands its SSD and solid-state hybrid product offerings. The
agreement also gives Samsung a significant ownership position in Seagate. The
agreement has no financing contingencies, and is subject to customary closing
conditions, including review by U.S. and international regulators. The
transactions are expected to close by the end of calendar year 2011.