Seagate in buyout talks

Hard drive maker Seagate Technology said on Thursday it is in talks to be taken private by an undisclosed buyer, and two sources familiar with the matter said those talks involve buyout firm TPG Capital.

TPG Capital and rival private equity firm Silver Lake previously held early-stage discussions about buying the hard-drive manufacturer, a source familiar with the matter told Reuters in September. The talks were early-stage and faltered, that source said at the time.

Silver Lake, however, is not involved anymore, a source familiar with the situation said on Thursday. It was unclear whether TPG is now working with another party, or seeking another party to team up with.

Other private equity firms could also be interested in Seagate such as Bain Capital, a source familiar with the situation said. Bain has been involved in other large technology deals such as chipmaker NXP Semiconductors and Sungard Data Systems.

Scotts Valley, California-based Seagate said in a statement that it received a preliminary indication of interest regarding a go-private deal and is in discussions with that party. But Seagate did not identify it.

Seagate said there was no assurance the firm will receive a formal offer or that a deal will take place and the board is evaluating the interest, and other alternatives, the company said. This was the first time it confirmed it has held talks about possibly going private.

In 2000, Seagate Technology Inc was bought in a complicated $20 billion deal with Veritas Software that took the world's No. 1 computer disk-drive maker private and then sold part of it to an investor group led by Silver Lake Partners and including Seagate management and TPG.

That business was taken public again in December 2002.

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," Roy said.

The hard-drive sector has suffered from slowing PC demand, with the rising popularity of tablets such as Apple Inc's iPad, which does not use a hard-drive.

In recent years, next generation solid state drives (SSDs), which do not have moving parts and are faster and more rugged than hard drives, have been seen as a serious challenge to the hard drive industry.

But many analysts contend pessimism about the hard-drive sector is overblown, and that companies such as Seagate and Western Digital can survive the challenge from SSDs and develop their own flash storage solutions.

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