Seagate Case

2016 Words Feb 12th, 2014 9 Pages
Seagate Buyout Case

Group 5
Heng Qiao
Eduardo Pereira
Wei Wang
Yanan Pei

Introduction of the companies
Seagate Technology, Inc. is one of the world’s largest manufacturers of computer disk drives and related data storage devices with approximately $6.5 billion in annual revenues. In early November 1999, Luczo, president and CEO of Seagate considered a restructuring proposal with Silver Lake, a successful private equity firm that is specified in technology business investing.
In May 1999, Seagate sold its Network & Storage Management Group to VERITAS Software Corporation, an independent manufacturer of storage management systems, for approximately 155 million shares of VERITAS stock. With an ownership
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This results in the cash portion of the purchase price available for payment to Seagate 's stockholders in connection with the merger to be approximately $1.285 billion (less the amount of rolled equity)”.
“While many of the implied equity values for Seagate 's operating businesses summarized in the table above exceeded the $2 billion purchase price in the leveraged buyout, Morgan Stanley arrived at its opinion that the consideration to be received by holders of Seagate common stock in connection with the merger was fair, from a financial point of view, to those holders, by considering all of its analyses of the merger and the leveraged buyout, taken as a whole.”
The passages show that Morgan Stanley fear value was $2 billion for the business operation. This value is 43% lower than our valuation of $3.48 billion for the deal. The passages and the published document are not clear why the fear value should be so low. This vague suggestion is more eccentric when we look the valuation made by Morgan Stanley. It had made a valuation using different methods such as comparable analysis, discount equity analysis, discount cash flow analysis, and sum-of-the-parts analysis, and different scenarios (Figure XXX). Based on the values that Morgan Stanley calculated, we calculated a weighted average value for it. Using the same weighted for each of the cases scenarios, and methods showed in the

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