Samsung Set for $1.4 Billion Windfall After Seagate Stock Sale

Samsung Electronics Co. (005930) will reap a $1.4 billion windfall from its decision two years ago to accept stock in Seagate Technology Plc (STX) as partial payment for selling its computer hard-disk drive business.

Samsung sold the unit in April 2011 for $687.5 million in cash and $687.5 million in stock. Since then Seagate’s shares have more than doubled and Samsung agreed to sell part of the stake back to the Dublin-based company.

Samsung exited its 22-year-old business making hard drives to focus on consumer electronics, memory chips and medical technology. The world’s biggest smartphone maker will sell back 32.7 million of its Seagate shares for $1.51 billion. It will keep another 12.5 million shares, valued at $561 million based on yesterday’s prices.

“It's good news for Samsung and a positive for the company that may be reflected in the fourth-quarter result,” said Ahn Seong Ho, a Seoul-based analyst at Hanwha Investment & Securities Co. “Samsung’s key business now is mobile devices, including smartphones and tablets.”

Nam Ki Yung, a spokesman for Samsung, declined to comment on the potential profit.

Since selling the business, Samsung has become the world’s biggest smartphone maker while Seagate shares have surged as it regained its investment grade at Fitch Ratings and Standard & Poor’s.

Photographer: SeongJoon Cho/Bloomberg

A visitor tries out a Samsung Electronics Co. Series 7 Chronos laptop computer at the World IT Show 2013 in Seoul. Close

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Photographer: SeongJoon Cho/Bloomberg

A visitor tries out a Samsung Electronics Co. Series 7 Chronos laptop computer at the World IT Show 2013 in Seoul.

Samsung began making hard-disk drives in 1989 and the business was part of the company’s semiconductor unit, the world’s largest. The company is also the biggest maker of televisions.

Seagate offered 45.2 million shares in the 2011 deal, the companies said at the time with an agreement to supply each other with electronic-storage devices. The deal followed Western Digital Corp. (WDC)’s agreement to buy Hitachi Ltd. (6501)’s storage business.

Seh-Woong Jeong, Executive Vice President at the Systems LSI division of Samsung, will remain a Seagate director after the sale of the 9 percent stake, according to a BusinessWire statement.

To contact the reporter on this story: Jungah Lee in Seoul at jlee1361@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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