A potential takeover of Seagate Technology Plc, which could have been worth about $9 billion, fell apart on Monday and the hard drive disk maker will instead pursue a share buyback plan.
Buyout firm TPG Capital had been pursuing Seagate, and was seeking other private equity firms to partner with, several sources familiar with the matter previously said.
However, other firms which may have partnered with TPG in a deal lost interest, those sources familiar with the matter previously told Reuters. Bain Capital lost interest in the last two weeks, sources previously told Reuters, which followed cooling interest from rival Kolberg Kravis Roberts & Co.
Seagate said on Monday it had ended talks because "the indications of the valuation range were not in the best interest of the company and its shareholders." Its shares, briefly halted after the close, slid 5.5 percent after-hours.
The company instead has won board approval to buy back $2 billion of its own shares.
Why do I post this, you ask? Is it because I am interested in Seagate? Nope. While the company is interesting to me, I am more interested in another PE deal falling apart. Think Dynegy. This is the downside of a PE deal falling apart: big share repurchases. Couple implications: as a debt holder, you cheer when the levered buyout doesn't happen, then immediately get whacked with a big share repurchase - usually funded by debt.As an equity holder, this will not get you to the same valuation as the buyout. Lose, lose, lose.
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