The Korean electronics giant has just announced that it’s selling its hard disk drive-manufacturing arm to Seagate Technology for a neat $1.375 billion in equal measures of cash and stocks. Samsung and Seagate are in a move to expand their existing relationship. We’re firmly of the belief that SSDs are our future and Samsung would seem to agree.
As a result, Samsung Electronics will own approximately 9.6 percent of Seagate and get to nominate one new member to join Seagate’s Board of Directors. The most important elements of the agreement include Samsung combining its hard disk drive operations into Seagate, receiving significant equity ownership in the HDD and storage solutions provider and enhancing the current patent cross-license agreement between the two companies.
In addition, Samsung and Seagate inked a NAND flash memory supply agreement under which Samsung will provide Seagate with its semiconductor products for use in Seagate’s enterprise solid state drives and other products, as well as a disk drive supply agreement under which Seagate will supply drives to Samsung for PCs, notebooks and other consumer electronics.
Under the terms of the agreement, Samsung will receive consideration consisting of 50% Seagate ordinary shares and 50% cash. Upon closing, Samsung will receive Seagate ordinary shares valued at $687.5 million (45.2 million shares, or approximately 9.6% ownership of Seagate, which is based on Seagate’s 30-day volume weighted average stock price prior to signing), plus $687.5 million in cash. Samsung will have a right to designate a nominee to join Seagate’s Board of Directors following closing.
Yesterday, reports claimed that Samsung was indeed considering selling its money-losing HDD business for $1 billion to 1.5 billion to raise cash to invest in new growth areas, with Seagate being named as a potential buyer.
Samsung has about 18% of the HDD market, according to iSuppli.