Archive to Be Sold in Cash Deal : Computers: Costa Mesa company, a leader in data storage systems, says it soon will be acquired by Conner Peripherals for $210.4 million.
Archive Corp., one of the nation’s leading makers of computer data storage systems, said Thursday that it has agreed to be acquired by Conner Peripherals Inc. for $210.4 million in cash.
The price per share--$11.25--is 66% higher than Archive’s closing price Thursday of $6.75 on the NASDAQ market. Analysts said a pending secondary offering by the Costa Mesa tape-drive manufacturer had kept its common stock artificially depressed in recent weeks. The stock has traded as high as $10 a share in the past year.
Neither Archive nor Conner officials would elaborate on Thursday’s terse announcement until a definitive pact is signed. That could happen as early as the first week in November, the announcement said.
Cash-rich Conner, based in San Jose, is the nation’s second-largest independent disk-drive maker. It reportedly out-wooed rival Seagate Technology Inc. of Scotts Valley, Calif., in its pursuit of Archive.
Analysts called the proposed deal a sound one that will further Conner’s efforts to expand beyond disk drives to complete data-storage systems.
“Archive has a big share of its market--more than 50%,” said Michael Murphy, editor of California Technology Stock Letter. “So if Conner wants to be a serious player in the tape-backup market, (buying Archive) is an easy way to do it.”
Conner is also working on development of a new generation of tape-drive systems, said Murphy, and acquiring Archive means it wouldn’t have to create a new distribution system for its own tape drives.
Ian Gilson, an analyst for L.H. Friend & Co. in Irvine, said Conner is “definitely getting a good piece of property for its money. They certainly can afford it.”
In its third-quarter financial report, Conner said it had $829 million in cash after buying back more than 11 million shares of its common stock from Compaq Computer Corp. in Houston for $240.7 million in cash.
Tape drives are becoming increasingly important, Murphy said, because the huge increases in disk-drive memory in recent years “means you just can’t back up on floppies anymore.” The average hard disk had 20 megabytes of memory in 1990 and 120 megabytes this year. That is expected to jump to 160 megabytes in 1993, Murphy said. It would take more than 100 floppy disks to back up that much data.
As part of the initial agreement with Conner, Archive has canceled its pending stock offering, and Conner has agreed under most circumstances to purchase about 1.9 million new shares of Archive common stock at $6.75 apiece if it cancels its acquisition plans.
Archive has about 13.4 million outstanding shares; the total climbs to 18.7 million shares when all warrants and debentures are included.
The acquisition plan was announced after the markets closed Thursday. Conner’s common stock closed at $18.50 a share on the New York Stock Exchange, down 13 cents a share.
Conner was founded in 1986 and quickly became the nation’s fastest-growing disk-drive maker. It is expected to post $2.2 billion in sales this year and reported $112.6 million in earnings for the first nine months. The company has about 10,000 employees worldwide, including 1,200 in California.
Archive, founded in 1980, estimates revenue of $380 million for its 1992 fiscal year, which ended Oct. 2. The company reported a profit of $7 million for the first nine months.
Analysts said they do not think the acquisition by Conner would cause any layoffs or relocations at Archive. The company has about 2,500 employees, and that number could increase under Conner because it “will be looking at Archive to lead a major attack in the tape-drive area,” analyst Murphy said.
