Why Xyratex Ltd. Shares Skyrocketed
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Xyratex Ltd. soared 27% today after Seagate Technology agreed to acquire the hard disk drive technologist for $374 million.
So what: The all-cash deal values Xyratex at $13.25 per share and represents a premium of 27% to its closing price on Friday. Seagate is making the move to strengthen its supply chain as well as to expand its storage portfolio, and judging by its own stock's small gain today, Mr. Market seems pleased with the price management is paying to do it.
Now what: Seagate expects the deal to generate positive cash flow immediately and to contribute revenue of $500 million-$600 million in 2015. "As a premier provider of HDD testing equipment, Xyratex is an important partner and we are excited to integrate these important capabilities which will considerably streamline our supply and manufacturing chain for our core HDD business," noted Seagate's President of Operations and Technology, Dave Mosley. "We are also pleased to acquire Xyratex's storage systems and high-performance computing business, which provides us additional opportunities to serve our customers with a broader array of storage solutions." So while Xyratex is likely all popped out at this point, Seagate's newly bolstered portfolio might be worth looking into.
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The article Why Xyratex Ltd. Shares Skyrocketed originally appeared on Fool.com.Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.