Disk-Drive Makers Seagate, Conner to Merge

Disk-drive makers Seagate Technology Inc. and Conner Peripherals Inc. said Tuesday they will merge in a stock swap valued nearly $1 billion.

The deal will create the world’s largest independent maker of disk drives with revenue of $7 billion and a third of the market. It could spark further consolidation in the industry.

Under terms of the agreement, Conner stockholders will receive 0.442 share of Seagate in exchange for each Conner share.

Seagate also has the option to buy up to 15% of Conner common stock at $17.90 per share if someone else buys a 20% share of Conner, offers to buy Conner shares or if Conner merges with another company.

Conner closed down 25 cents a share at $16 on the New York Stock Exchange. Seagate shares fell $1 to close at $40.50.

Directors of Seagate and Conner have endorsed the deal, which needs approval of shareholders and regulators.

The two companies disclosed in late September that they were involved in preliminary talks. Analysts said then that a deal made sense because it would broaden Seagate’s product line and ease high research and development costs that have troubled Conner, according to analysts.

Seagate, based in Scotts Valley, Calif., was a pioneer in disk drives, which store data for computers. The 18-year-old company produces high-end drives for mainframes, minicomputers, workstations and video-editing systems.

For fiscal 1995 ended June 30, Seagate earned $260 million, up 16% from 1994. Revenue rose 30% to $4.5 billion.

San Jose-based Conner was founded in 1986 by Finis Conner, who had co-founded Seagate with Al Shugart. It grew quickly as an early producer of 3.5-inch disk drives. In recent years, Conner has been hurt by competition and debt from its acquisition of Archive Corp.