Seagate to Buy LaCie
This is a Press Release edited by StorageNewsletter.com on Fri, May 25th, 2012
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Philippe Spruch will work for 3 years at HDD maker.
Seagate has offered to purchase from Philippe Spruch, LaCie's chairman and CEO, and his affiliate, all of their shares, representing 64.5% of the outstanding shares of LaCie.
Following receipt of governmental approvals (Antitrust filings in the United States and in Germany and approval of foreign investments by the French Ministry of Finance) and the close of this transaction, Seagate would commence an all-cash simplified tender offer (followed as the case may be by a squeeze-out procedure) to acquire the remaining outstanding shares in accordance with the General Regulation of the French Autorité des Marchés Financiers (AMF).
Seagate has offered Spruch and his affiliate €4.05 per share in cash, minus a potential adjustment depending on the cash and debt position of LaCie at closing. This price may be increased by a possible price supplement of 3% in the event that the threshold of 95% of the shares and voting rights of LaCie would be reached by Seagate within 6 months following closing, resulting in a maximum potential price per LaCie share of €4.17.
Without the price supplement, the offer currently values LaCie at an approximate €146 million, or $186 million total equity value, including acquired net cash of approximately €49 million, or $65 million, as of March 31, 2012. The €4.05 per share price represents a premium of 29% to LaCie's average closing stock price over the 30 trading days ended May 22, 2012.
Ricol Lasteyrie & Associés was appointed as independent expert by the board of directors of LaCie, to deliver a fairness opinion on the price that would be offered in the context of the tender offer, including in the perspective of a potential squeeze-out procedure.
The transaction would combine two complementary product and technology portfolios, adding LaCie's line of branded consumer storage solutions, NAS solutions and software offerings to Seagate's array of consumer storage products. The combination would accelerate Seagate's growth strategy in the expanding consumer storage market, particularly in Europe and Japan, and add strong engineering and software development capabilities, as well as relationships with several key retailers.
The transaction is expected to be neutral to Seagate's fiscal 2013 earnings per share.
Following the close of the sale of his shares to Seagate, Spruch would join Seagate and lead the company's consumer storage products organization. Reporting to him would be Patrick Connolly, who currently serves as vice president and general manager of Seagate's retail group, as well as Pierre van der Elst, who currently serves as deputy general manager of LaCie.
The financial terms of the new position of Spruch are not determined and would therefore be described subsequently, including in the tender offer documentation.
"Seagate has a strong commitment to the growing consumer storage market and bringing the most dynamic products to market. LaCie has built an exceptional consumer brand by delivering exciting and innovative high-end products for many years. This transaction would bring a highly complementary set of capabilities to Seagate, significantly expand our consumer product offerings, add a premium-branded direct-attached storage line, strengthen our network-attached storage business line and enhance our capabilities in software development," said Steve Luczo, Seagate chairman, president and CEO. "We are also excited that Philippe, who is a true visionary and leader in the consumer storage business, would join Seagate to run our consumer storage products organization."
"With the proliferation of devices and content being shared and stored today, consumer demand for high-quality branded storage solutions continues to grow," said Spruch, LaCie's chairman and CEO. "We are excited about the potential for this combination to benefit customers and employees by creating significant scale and opening up new markets. We look forward to making the resources of a much larger company available to our customers around the world."
LaCie will initiate the information and consultation process required by its employee representative council in relation to the contemplated transaction, in accordance with French law. Upon completion of this process, Seagate and Spruch would execute a definitive share purchase agreement and finalize the purchase of the controlling interest held by Spruch and his affiliate.
This share purchase transaction is expected to close in the third calendar quarter of 2012 pending completion of the relevant governmental reviews. Seagate would then commence a tender offer for the remaining outstanding shares of LaCie (followed as the case may be by a squeeze-out procedure), subject to a clearance decision from the AMF.
The tender offer is expected to be completed in the third calendar quarter of 2012.
The transaction is subject to regulatory approval in the United States (antitrust filing), France (approval of foreign investments by the Ministry of Finance) and other jurisdictions (antitrust filing in Germany) and to other customary closing conditions.
Morgan Stanley & Co. LLC served as financial advisor and Allen & Overy LLP served as legal advisor to Seagate in connection with the transaction. De Pardieu Brocas Maffei A.A.R.P.I. served as legal advisor to LaCie.
Our comments :
After acquiring Samsung HDD business, Seagate continues to invest, this time in external storage products, acquiring one of the worldwide leader, LaCie, to better compete with the Buffalo, Iomega/EMC, Netgear, Qnap, Synology, Thecus and others. And principally with its main competitor in HDDs as well as branded products: WD.
For their more recent fiscal quarter ended March 2012, Seagate shipped 2.7 million and WD 2.9 million HDDs into branded products.
LaCie is a nice acquisition for Seagate that will get more sophisticated storage subsystems (RAIDs, NAS) and software even if there is some overlap for the low end of their respective portfolios. For example, LaCie is much more advanced than Seagate - that offers just a GoFlex connector - in high-end Thunderbolt technology (Little Big Disk and 2Big Thunderbolt).
Seagate will also get Wuala, a Swiss online backup company acquired by LaCie in 2009 for approximately $10 million. It will be offered in hybrid solutions with LaCie's products and branded under the Seagate's name, according to LaCie chairman and CEO Philippe Spruch. He added that Wuala was currently evaluated by Seagate's subsidiary Evault, also an online backup provider but more oriented on enterprises than consumers.
Largest shareholder Spruch is personally the biggest recipient of the transaction as he will receive around 64.6% of €146 million or €94 million for all his shares in the company, before the complete acquisition to come. According to the company's profile, he owned personally 2.9% of LaCie and 58.5% through Diversita, a company he totally controls. The global price for Seagate will be probably in the range of $150 million to $200 million.
Spruch co-founded in March 1989 with Pierre Fournier the company headquartered in Paris, at this time Electronique D2 and becoming LaCie in 1998, three years after acquiring the U.S. firm that has the same name and was a subsidiary of Quantum. He became chairman and CEO since July 16, 2001. He is also a director at U.S. firm Amikaï.
Being for a long time an entrepreneur, it seems difficult to see him working under the direction of somebody else. "No, it's a cool job, even if I have a boss. I have signed a contract for a minimum of three years," he answered. "There is a lot to do to become a leader in NAS and hybrid Wuala. It's motivating to compete with Synology, Qnap, Buffalo, Netgear, WD, Thecus, etc. And it's challenging to be inserted between GDrive, iCloud and Mozy, Dropbox."
He will not replace a current Seagate's executive. "It's a new position created by Seagate and I'm going in Cupertino, CA to head the teams of Seagate's Branded (SBS) and LaCie. It's a more independent and flexible entity of more than $1 billion," he added.
He reveals that LaCie was discussing since three to four years not only with Seagate, but also with Toshiba and WD concerning the acquisition of his company.
Strangely, on one side, Spruch hate them, to finally loves one of them. He dislikes these three companies when he was obliged to buy HDDs integrated into LaCie's subsystems and at the same time was competing against them with the disadvantage to pay more for HDDs than these makers. In an interview published in the paper version of StorageNewsletter in March 2009, he said: "When we don't have S for 'Stupid" or 'Seagate' in front of us, it's a very healthy business." Spruch was also notably angry about the recent consolidations between them, generating higher prices of disk drives. Now into Seagate, LaCie products will benefit of the nice situation to acquire HDDs from Seagate at the best prices, directly from the assembly plants.
LaCie posted lower revenues in fiscal year ending June 30, 2011, €266.8 million, than the former year (€286.2 million), with about the same net income at less than €11 million. It was probably the right time to find a buyer, the competition being much rougher in small external storage systems with the recent addition of huge HDD companies.
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