Silver Lake and TPG Take Seagate Public

In what is the largest technology IPO since Accenture raised $1.9 billion in July 2001, Seagate Technology re-appeared on the public market Dec. 10, opening at $12 per share.

The opening price was lower than the target of $13 to $15 a share. Investors Silver Lake Partners and Texas Pacific Group had hoped to raise $1 billion from the IPO (that comes out to $13.79 per share, based on the number sold), but raised only $870 million overall.

Still, when put in the context of this year’s difficult exit market, that amount is nothing to sneeze at. “Considering the entire IT industry raised $265 million [in IPOs] in 2002, it is remarkable that Seagate was able to raise what they did,” says John Monroe, a vice president at Gartner Group. “This is reflective of Wall Street getting back to the basics, investing in a superior purveyor of an essential technology.”

In Seagate’s second IPO – the first one occurred in September 1981 – the company itself sold 24 million shares, totaling $288 million in pre-expense revenue, with the remaining 48.5 million shares sold by investors. According to a source close to the deal, these issued shares represent 17% of the total, and if Seagate’s shares continue to trade at $12, the remaining 83% is worth approximately $4.3 billion.

It’s been a busy three years for the disk drive maker. In March 2000, at the height of the tech boom, Silver Lake and TPG bought Seagate for $2 billion, acquiring equity of $1.1 billion and $900 million in debt.

In October, Silver Lake and TPG filed with the Securities and Exchange Commission to raise $1 billion through a public offering of the Scotts Valley, Calif.-based manufacturer.

Seagate, the clear market leader in a crowded, competitive space, holds about a third of the hard-drive market share, with its closest rivals being Maxtor and Western Digital.

“They are positioned as strongly as they have ever been,” says Monroe. “They have produced near flawless execution on technology transitions over the last five years, enabling them now to be a qualified vendor for all desktop OEMs. Going from behind the curve to ahead of it is brutally difficult, but they have done it in a very competitive marketplace.”

Just one day prior to Seagate’s IPO, Maxtor, which has a 25% market share in the hard-disk space, announced it was raising its fourth-quarter revenue projections to $1 billion, a 4% increase from the company’s latest projections.

“This announcement is bound to have a positive effect on [the stock price of] Seagate, which makes you wonder about Maxtor’s timing,” says a source close to the deal.

Email Joseph Christinat