Seagate Technology Said to Have Held Failed Talks With TPG, Silver Lake

Seagate Technology Plc, the world’s largest maker of hard-disk drives, held talks with previous owners TPG Capital and Silver Lake about going private again, according to people with knowledge of the discussions.

Talks ended in recent weeks, and a deal, which would have been valued at about $7 billion, is unlikely to happen, said the people, who declined to be identified because the discussions were private. Representatives of TPG, Silver Lake and Dublin- based Seagate declined to comment.

Negotiations collapsed as Seagate wasn’t meeting some of the financial projections the two private-equity firms had based the deal on, said one of the people familiar with the situation. That led to a disagreement over price, the person said. Morgan Stanley, Deutsche Bank AG and Bank of America Corp. were advising and lending on the deal, the people said.

“The personal computer market is going to have a weak finish to the year and the market for hard drives is oversupplied, so there’s margin and price pressure,” said Ashok Kumar, an analyst at Rodman & Renshaw LLC in New York, who rates Seagate “market outperform.”

Seagate surged as much as 6.2 percent, rebounding from an earlier loss of as much as 4 percent, by 2:40 p.m. New York time in Nasdaq Stock Market trading. Before today, the stock had dropped 38 percent this year, to $11.29 a share, valuing the company at about $5.3 billion.

Photographer: Jonathan Drake/Bloomberg

A Seagate Technology employee examines a disk platter at the company's recording media manufacturing plant in Singapore. Close

A Seagate Technology employee examines a disk platter at the company's recording media... Read More

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Photographer: Jonathan Drake/Bloomberg

A Seagate Technology employee examines a disk platter at the company's recording media manufacturing plant in Singapore.

Fewer Deals

Trading of Seagate’s shares was halted for five minutes after the sudden rise triggered a circuit breaker implemented after the U.S. equity market crash in May.

A deal of the magnitude Seagate discussed would have been the largest leveraged buyout by U.S. private-equity firms in more than three years as funds hunt for targets in a stabilizing economy. TPG, based in Fort Worth, Texas, and Silver Lake, based in New York and Menlo Park, California, agreed to buy Seagate in 2000 and took it public in 2002 for $12 a share.

Buyout firms have struggled to restart dealmaking after the global financial crisis froze credit markets in mid-2007, ending the biggest LBO boom in history. Managers have announced $68.1 billion worth of deals so far this year, versus $443.6 billion during the same period in 2007.

The firms pool money from investors to take over companies, financing the purchases mostly with debt, with the intention of selling them later for a profit.

“To deliver the kind of consistent financial results of the kind that would be a typical yardstick for a private-equity transaction, Seagate is just not in a position to do that now,” Kumar said.

LBOs Fall Through

The failure of the Seagate talks is at least the second large LBO to fall through in recent months. TPG, along with Blackstone Group LP and Thomas H. Lee Partners LP, pursued an ultimately unsuccessful takeover of Fidelity National Information Services Inc. in May. The private-equity groups offered more than $15 billion for the company, people with knowledge of the deal said at the time.

TPG’s deal to buy IMS Health Inc. for $5 billion, announced in November of last year, stands as the largest LBO since the credit crisis.

To contact the reporters on this story: Jason Kelly in New York at jkelly14@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net.

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net; Jennifer Sondag at jsondag@bloomberg.net.

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