October 14, 2010 / 10:06 PM / 7 years ago

Seagate confirms talks to go private

LOS ANGELES (Reuters) - Seagate Technology Plc shares surged over 20 percent after the hard-drive manufacturer said on Thursday it was approached by another company interested in taking it private.

The hard drive manufacturer also said it retained Morgan Stanley & Co Inc and Perella Weinberg Partners LP to provide financial advice as it explores the possibility of going private.

Seagate's arch rival Western Digital Corp saw its shares rise 8.9 percent after-hours.

Last month, TPG Capital LP and Silver Lake held early stage talks about buying Seagate, but it then appeared unlikely to result in a deal, a source familiar with the situation said at the time.

Kaushik Roy, an analyst with Wedbush Securities, said a private equity firm could be interested in Seagate to wait out the downturn in hard-drive demand.

"The weakness in the stock is in end-demand and market related, it's not that the company is mis-executing. So private equity is looking at it and saying, geez, these are cheap stocks."

Seagate shares had been trading at or below six times its price to earnings ratio, compared with 10 to 14 times for other technology stocks, he said.

With market capitalization of about $6 billion today, Seagate is worth less than a third the approximately $20 billion private equity firm Silver Lake Partners paid to take it private for the first time in 2000.

Seagate, the top hard-drive manufacturer by revenue, reentered the public market in 2002.

If a deal to take Seagate private is clinched, it would be one of the biggest leveraged buyouts of the year.

Trading in Seagate shares was temporarily halted following the announcement, but after it resumed the company's shares spiked to $15.33 in after hours trading. The shares of rival Western Digital Corp were up 8.9 percent at $32.10 in after-hours trading.

Reporting by Alex Dobuzinskis; editing by Andre Grenon

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