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Seagate to acquire Maxtor for $1.9bn in stock

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SCOTTS VALLEY, Calif.: Seagate Technology will acquire Maxtor Corporation in an all-stock deal valued at approximately $1.9 billion.

Both the companies jointly announced here that they have entered into a definitive agreement under which Seagate will acquire Maxtor.

Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, Maxtor shareholders will receive .37 shares of Seagate common stock for each Maxtor share they own. When the transaction is completed Seagate shareholders will own approximately 84 percent and Maxtor shareholders will own approximately 16 percent of the combined company.

The combination of Seagate and Maxtor will build on Seagate's foundation as the premier global hard disc drive company, leveraging the strength of Seagate's significant operating scale to drive product innovation, maximize operational efficiencies, and realize significant cost synergies. These capabilities will enable the combined company to compete more effectively as the highly competitive data storage industry addresses the challenges and opportunities for significant growth that lie ahead.

The combined company is expected to generate significant synergies, and the transaction is expected to be at least 10-20 percent accretive to Seagate on a cash EPS basis after the first full year of combined operations.

As with other past combinations of disc drive manufacturers, revenue attrition is anticipated to result from this combination. Synergy estimates take into account anticipated revenue attrition. It is estimated that the incremental revenues will generate gross margins that are in line with the high end of Seagate's stand-alone model. In addition, the combined company expects to achieve approximately $300 million of annual operating expense savings in connection with the transaction after the first full year of integration.

Seagate's executive management team will continue to serve in their current roles. The combined company will retain the Seagate name and executive offices will be located in Scotts Valley, California. Dr. Park will become a director of Seagate upon the closing of the transaction. Seagate's chairman, CEO, executive vice presidents, and the principal equity investors affiliated with certain of Seagate's directors have committed to vote their shares in favor of the acquisition.

The transaction is expected to be completed in the second half of calendar 2006, subject to obtaining shareholder approvals and customary regulatory approvals. There is a termination fee of $300 million payable to Maxtor under certain conditions. The transaction is intended to be tax-free to Maxtor shareholders.

Prior to the closing, Seagate and Maxtor will operate as separate businesses.

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