Seagate Says Talks Underway To Go Private, Again

Seagate is in discussions with a third party over the possibility of taking the storage company private.

If the discussions result in a transaction, it would be the second time that Seagate went private.

Seagate on Thursday issued a statement in which it said that it received "a preliminary indication of interest regarding a going private transaction." The company further stated that it is in discussion with the party who indicated the interest, and that its board of directors is "evaluating the indication of interest and other strategic alternatives."

Seagate did not unveil the name of the third party, and said it will not provide any additional comments regarding the talks at this time. The company also said that there is no assurance that it will receive a formal offer or actually complete any transactions which would take it private.

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Bloomberg reported in September that Seagate was talking to TPG Capital and Silver Lake, two investment firms which previously owned Seagate, about the possibility of taking Seagate private in a deal worth about $7 billion. However, Bloomberg wrote, the deal fell through because Seagate was not meeting financial projections that the two investment firms were expecting.

Next: The First Time Seagate Went Private

Seagate went private the first time in early 2000 as part of a complicated $20 billion transaction involving Seagate, Veritas Software, and an investment group.

Under that deal, Veritas acquired all of the Veritas shares that at the time were held by Seagate, as well as Seagate's securities in several hardware and software vendors including flash memory manufacturer SanDisk, Fibre Channel switch vendor Gadzoox Networks, drive component manufacturer CPC, and speech recognition software developer Dragon Systems.

Seagate's core operating businesses, including hard disk and tape drive manufacturing and $800 million in cash retained, were then acquired for $2 billion in cash by an investor group which included the drive vendor's management team. Seagate's shareholders received common shares of Veritas plus cash totaling about $77.50 per share of Seagate stock, a premium of about 26 percent.

Seagate eventually went public again in December 2002 to get the capital needed to invest in the fast-growing hard drive market.

Next: Ramifications Of Seagate's Going Private

Aaron Rakers, an analyst with Stifel Nicolaus, a Baltimore-based equity research firm, wrote in a Thursday research paper that Seagate's going private would be positive news for both Seagate and its top rival, Western Digital.

For Seagate, the deal would value that company's shares at around $15 each, up significantly from its closing price of $12.69 on Thursday when trade in the stock was halted due to the news.

Such a deal would cause Western Digital's management team to consider going private and or to be more proactive in using its cash for share repurchases, Rakers wrote.