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Big development:
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Seagate Technology, the digital storage giant, reached a deal Tuesday to acquire a rival, Maxtor, for $1.9 billion in stock, according to executives involved in the transaction.
The deal, which was approved by the boards of both companies, is expected to be announced as early as Wednesday, the executives said.
Under the terms of the deal, Maxtor shareholders will receive 0.37 share of Seagate stock, the equivalent of $7.25 a share. That is a 60 percent premium over the price of Maxtor's shares, which closed Tuesday at $4.52.
When the deal is completed Seagate investors will own about 84 percent of the combined company and Maxtor shareholders about 16 percent.
For Seagate, the deal is not about filling a gap in its product line but rather is a gamble that it can utilize its manufacturing infrastructure to make Maxtor's disk drives at a lower cost. The executive said Seagate expected to create about $300 million a year in savings.
The transaction also fortifies Seagate's dominant position, but may raise questions among investors. Seagate, which was founded in 1979 and which was the first maker of hard disks for personal computers, has become an industry leader by pushing quickly for smaller drives and into new storage technologies.
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