Melissa Bockhold Heather Coddington - Franklin College

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CFO Kenneth Lonchar stated, “We were interested in staying away from it [Seagate]. We are building a nice software business, and we don’t want to be distracted” (Mintz). However, to complete this deal, Stephen Luczo had to have VERITAS’s participation. Luczo asked VERITAS to acquire the remainder of Seagate’s company, which included 128 million shares of VERITAS stock. The next step in the merger would include VERITAS distributing shares of its stock to Seagate shareholders in a tax-free exchange (Mintz). “VERITAS would get 128.1 million of its shares by acquiring Seagate, but will give Seagate holders only 109.3 million shares” (Sloan). Since stock-for-stock swaps are not taxable, this allows Seagate to save around $5 billion in taxes. The stockholders also gain because the swap allows them to defer the taxes on the stock they received from VERITAS. So, a stock-for-stock swap is both beneficial to Seagate and its shareholders, but would VERITAS agree to this deal? We believe that VERITAS would agree to participate in the stock swap. “VERITAS retires $2 billion of stock without having to pay anything for it” (Sloan). IX. CONCLUSION We have just addressed the issues of Seagate’s low stock price, financing and capital structuring, as well as VERITAS’s needs and concerns. We have justified our decision to value Seagate at $2 billion, thoroughly explained how the buyout should be financed, and described how the new capital structure should look. We have given a convincing argument as to why a leveraged buyout was the best choice in addressing the low stock price. We have also addressed the concerns of VERITAS by offering them a position where the company can come out ahead by retiring $2 billion in stock without 42
having to pay any taxes, while, at the same time, decreasing the amount of outside ownership. We feel that our recommendations regarding Seagate’s four main issues are the best options for Seagate to implement in order to maintain its position in the market and its future profitability. 43
Page 1 and 2: Seagate Technology Buyout By: Melis
Page 3 and 4: I. INTRODUCTION In 1999, Seagate Te
Page 5 and 6: 1997 1997-1998 July 1998 May 1999 J
Page 8 and 9: B. Competition Competition is the m
Page 10 and 11: to twelve months, is a new opportun
Page 12 and 13: inventories of disk drive component
Page 14 and 15: was to turn the company private sin
Page 16 and 17: STEP TWO: Seagate exchanges existin
Page 18 and 19: 100% 90% 80% 70% 60% 50% 40% 30% 20
Page 20 and 21: the value seen in its VERITAS holdi
Page 22 and 23: For all the reasons listed above, S
Page 24 and 25: large amount of confidence in Seaga
Page 26 and 27: capital structure should have a hig
Page 28 and 29: how capable a company is to pay bac
Page 30 and 31: 1.98. Although, Seagate is much low
Page 32 and 33: The next ratio we calculated was Ne
Page 34 and 35: Seagate Averages (1981- 1999) Disk
Page 36 and 37: ii. Analysis of Historical Financia
Page 38 and 39: experience? What will their earning
Page 40 and 41: Lake and other potential investors
Page 44 and 45: X. SILVER LAKE PARTNERS INTERVIEW M
Page 46 and 47: Copy of thank you note mailed to Al
Page 48: XII. WORKS CITED Austin, Alan. Mana

Melissa Bockhold Heather Coddington - Franklin College

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