Hard disk drive maker Seagate Technology Inc has agreed to buy data storage solutions company Xyratex Ltd for about $374 million.
The deal is expected to close by mid of following year. Per the agreement, Xyratex stockholders will be given $13.25 a share in cash. The price per share is 27 percent premium over Friday's closing price.
UK-based Xyratex sells its data-storage systems and other related manufacturing equipment to makers of disk drives and computer equipments. Earlier this year, the company was seen struggling with falling sales and earnings.
After the acquisitions, Seagate will continue operating this business as a stand-alone entity. The deal will help expand Seagate's storage solutions portfolio by adding Xyratex's "industry-leading enterprise data storage systems and high-performance computing business."
"This is a strategically important acquisition for Seagate as we continue to focus on delivering best-in-class storage solutions for our customers," said Dave Mosley, president of operations and technology at Seagate. "As the average capacity per drive increases to multi-terabytes, the time to test these drives increases dramatically. Therefore, access to world-class test equipment becomes an increasingly strategic capability. 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. 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 and Western Digital Corp. are the two prominent manufacturers of HDD and they have been looking to expand their businesses by focusing more on energy-efficient solid state drives (SSDs) in the market in the range of devices other than traditional computers.
For Seagate, the deal might be just a "complementary asset, but not a real game-changer," Argus Research analyst Jim Kelleher said, as the shares remained little changed, closing at $56.01 on the Nasdaq on Monday and $55.94 on Tuesday.
Shares of Xyratex closed up at $13.30 on Monday and on Tuesday, the company's shares jumped 0.60 percent further to close up at $13.38 on the Nasdaq.