Seagate, Western Digital Face EU Probes

Seagate Technology Plc (STX) and Western Digital Corp. (WDC) face extended antitrust scrutiny from European Union regulators into separate deals to expand their hard-disk drive businesses amid a demand slump.

The European Commission opened in-depth probes into Seagate’s bid to buy Samsung Electronics Co.’s computer hard- disk drive operations and Western Digital’s purchase of Hitachi Ltd. (6501)’s storage business with a deadline of Oct. 10 to rule on the deals, it said in an e-mailed statement today.

The hard-drive industry “has already experienced significant consolidation and the proposed acquisitions will further reduce competition,” Joaquin Almunia, the EU’s antitrust chief, said in the statement.

The two deals would reduce the number of large manufacturers of mechanical hard-disk drives for computers to three from five, leaving Western Digital with 50 percent of the market, Seagate with 40 percent and Toshiba Corp. (6502) with around 10 percent, according to researcher IHS Inc.’s iSuppli.

Brian Ziel, a spokesman for Dublin-based Seagate, declined to comment on the decision. Western Digital will cooperate fully with the European Commission Phase II review, the Irvine, California-based company said in a statement. The company now expects the transaction to close in the fourth quarter of 2011, it said.

Samsung, based in Suwon, South Korea, and Hitachi didn’t immediately respond to e-mails outside regular office hours.

U.S. Scrutiny

U.S. regulators are looking closely at both deals. Western Digital said in a regulatory filing that it and Hitachi received a second information request from the Federal Trade Commission in April that extended the antitrust review of the deal.

Seagate also received a second request from the FTC on May 20, it said in a regulatory filing. The company said it was “working cooperatively with the FTC as it reviews the proposed transaction.”

The FTC and other global regulators are focused on benefits to consumers and are “less concerned about the number of players out there,” Western Digital’s chief financial officer Wolfgang Nickl said on May 10.

“We would think that the FTC and others will listen to the customer,” Nickl said at the time. “We remain highly confident that we get this through.”

Drive makers have slashed prices to compete against flash memory and solid state drive storage. Consolidation among drive makers follows Toshiba’s 2009 purchase of Fujitsu Ltd. (6702)’s money- losing hard-disk drive business. Toshiba is also the world’s second-largest maker of flash-memory chips.

The hard disk drive industry “remains weak in the face of a declining PC market,” JPMorgan analysts Thomas Egan and Lina Kabaria wrote in an April research note.

To contact the reporter on this story: Aoife White in Budapest at awhite62@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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