Seagate has announced that its board of directors haw terminated discussions with private equity firms and has authorised the repurchase of $2 billion of its own stock.
In a statement the company said the decision had been taken because it had decided that
the indications of the valuation range were not in the best interest of the company and its shareholders.
It had been debating the move from October when it had received a preliminary indication of interest regarding a going private transaction. Since then its board of directors have been in discussions with that party.
“We appreciate the interest shown by the private equity firms and our dialogues with them were extensive and thoughtful,” said Steve Luczo, Seagate chairman and CEO.
“However, management and the Board have chosen to cease discussions concerning a private equity-led leveraged buyout. Given the strong debt markets, improving business conditions and other financing options, Seagate has initiated a plan to further optimise its capital structure to maximize shareholder returns.”
And now the talks are off Seagate’s board of directors have authorised the company to repurchase up to an additional $2 billion of its outstanding ordinary shares. According to the company this new step “continues Seagate’s commitment to enhancing shareholder value.”
Seagate expects to fund the share repurchase through a combination of cash on hand, future cash flow from operations and potential alternative sources of financing. It added that share repurchases under this authorisation may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, or by any combination of such methods.
The timing and actual number of shares repurchased will depend on a variety of factors including the ordinary share price, corporate and regulatory requirements and other market and economic conditions. It also warned that this scheme could be suspended or discontinued at any time.
Seagate believes that the demand for hard disk drives has improved, and the current expectation for the total available market in the December 2010 quarter is approaching 170 million units. It added that supply and demand appear to be well balanced, with the company’s inventory across all channels at or below targeted levels.
As a result the company predicts that revenue will be at least $2.7 billion in December and gross margin as a percent of revenue to be at least 19.5 percent.
However it pointed out that the December outlook does not include the impact of any potential new restructuring activities, any charges related to the aforementioned terminated discussions, future mergers, acquisitions, financing, dispositions or other business combinations the company may undertake.
It said its policy was to refrain from commenting on any such activities.