Seagate Technology has shared clear intention to come under a strategic procurement agreement with Dot Hill Systems Corp. The definitive agreement which a wholly-owned indirect subsidiary of Seagate will commence a tender offer for all of the outstanding shares of Dot Hill in an all-cash transaction valued at $9.75 per share, or a total of approximately $694 million on a fully-diluted equity value basis. As Dot Hill has approximately $49 million in cash on its balance sheet as of June 30, 2015, the transaction reflects an enterprise value of approximately $645 million. The consideration represents a 50% premium over the preceding three month stock price average.
Dot Hill’s external storage array-based systems and software products will complement and expand Seagate’s storage systems offerings and be offered as part of Seagate’s Cloud Systems and Electronics Solutions business. Seagate will leverage Dot Hill’s storage technology IP portfolio and software capabilities to drive innovation and provide incremental value to their combined OEM customer base.
Commenting on the deal, Phil Brace, President of Cloud Systems and Electronics Solutions at Seagate said, “Dot Hill’s innovative storage systems and IP portfolio are a strategic addition to our storage technology portfolio, enabling us to accelerate the growth of Seagate’s OEM-focused cloud storage system and solutions business.” “We are focused on providing the highest quality storage systems for our OEM customers and Dot Hill’s storage solutions will enable us to advance our strategic efforts. We look forward to welcoming Dot Hill’s strong team, which has proven experience in developing and delivering best-in-class storage solutions that are trusted by the world’s leading IT manufacturers and their channel partners, and we expect the transaction to be accretive to non-GAAP earnings in fiscal 2016.”
“Seagate has a strong reputation in enterprise storage and is focused on building out its best-in-class storage system capabilities, making them the right home for the talented Dot Hill team,” said Dana Kammersgard, Chief Executive Officer of Dot Hill. “Dot Hill’s customers will benefit from leveraging Seagate’s leading technology and infrastructure to accelerate the delivery of advanced solutions.”
Following the successful completion of the tender offer, Seagate will acquire all remaining shares not tendered in the tender offer through a second-step merger at the same price as to be paid to stockholders tendering their shares in the tender offer.
The transaction is currently expected to close during the Q4 of 2015.