MTI to Buy Troubled Data Storage Maker : Technology: Deal for Anaheim firm brings with it a $100-million supply subcontract from Boeing.
MTI Technology Corp. has agreed to acquire a troubled Northern California data storage system maker in a deal that brings with it a $100-million, four-year supply subcontract from Boeing Co.
The agreement, to be announced this morning, calls for MTI to merge with publicly traded System Industries Inc. in Milpitas, after System files for Chapter 11 bankruptcy protection in early November. System’s shares are traded on the American Stock Exchange.
MTI, identified by Inc. magazine as one of the nation’s fastest growing private companies, would be the surviving company when System completed its Chapter 11 reorganization. MTI’s current stockholders would own 96.7% of the combined companies’ stock; System Industries’ creditors would receive the rest.
Founded in 1968, System has 265 employees while MTI employs 485. Both companies have facilities in North America and Europe, with most of their employees at their respective headquarters locations.
There will be some consolidation of jobs and facilities to eliminate overlaps once the merger is completed, said Bob L. Corey, chief financial officer of Anaheim-based MTI. He said he could not say how many jobs would be eliminated.
Terms of the acquisition have not been disclosed pending filing of the bankruptcy reorganization plan, but the deal calls for MTI to pay a combination of cash and promissory notes, Corey said.
One result of the merger will be to make MTI a publicly traded company. The company’s shares are held by about 200 investors, with Chairman Raymond Noorda and President Steven Hamerslag owning about 70%.
MTI, which in its 1993 fiscal year has grown to $116 million in revenue up from $3 million in 1988--the year after Noorda and Hamerslag bought it--develops and makes specialized data storage hardware and software that enables computers to continue retrieving information in the event various components of the storage system fail. The 21-year-old company holds numerous patents for its redundant array of independent discs, or RAID, products.
Corey said the System acquisition would add about $60 million a year to MTI’s revenue--including about $25 million from a multiyear subcontract to supply storage systems to Boeing for a U.S. Army program.
He said MTI approached System about the merger after learning earlier this year of a company loan default.
