Seagate scotches plan to go private

Seagate has said that it is no longer interested in a private buyout, having entered into talks with private equity firms last month with a view to taking the company private.

An initial bid by TGP and Bain Capital was proposed, and Toshiba and Samsung were also being considered as possible bidders for the world's biggest hard drive company.

The talks fell through but a renewed attempt at a bid by TGP has reportedly collapsed and Seagate has said that it is concentrating on expanding rather than entering into an acquisition process.

"We appreciate the interest shown by the private equity firms, and our dialogues with them were extensive and thoughtful," said Steve Luczo, Seagate chairman.

"However, management and the board have chosen to cease discussions concerning a private equity-led leveraged buyout.

"Given the strong debt markets, improving business conditions and other financing options, Seagate has initiated a plan to further optimise its capital structure to maximise shareholder returns."

Seagate said that it will buy $2bn (£1.28bn) of its own stock to enhance shareholder value. Shares fell by over five per cent in today's trading.

Demand for hard drives has improved significantly, and Seagate expects revenue to be $2.7bn (£1.7bn) for its next quarter with gross margins of at least 19.5 per cent.

"Reading between the lines, it sounds as though Seagate's potential suitor did not have as high an opinion of the company's worth as Seagate did itself," Charles King, principal analyst at Pund-IT, told V3.co.uk.

"The result is a respectful brush-off by both sides, though I doubt they'll exchange Christmas cards this year. The $2bn stock buyback is an interesting move, and may indicate that Seagate believes it needs to do something to bolster its share value."