Mergers: Commission clears proposed takeover of Maxtor by Seagate in hard-disk drive business

The European Commission has cleared under the EU Merger Regulation the proposed merger between two US manufacturers of hard-disk drives (HDD), Seagate and Maxtor. The Commission concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any significant part of it.

Seagate designs, manufactures and globally markets HDDs for a range of uses. It also produces thin-film recording media and read/write heads that are used in its HDDs.

Maxtor is a global supplier of HDDs for a range of uses, including desktop computers, servers and consumer electronics applications and is also active in the production of recording media for its own HDDs.

Seagate’s and Maxtor’s activities overlap in the EEA as well as worldwide in particular in the production of HDDs for enterprise applications and HDDs for desktops. As a result of the transaction, Seagate will enhance its leading position in the overall HDD business and in the markets of HDDs for enterprise and desktop applications.

In its assessment of the likely effects of the proposed takeover, the Commission considered in particular the following factors:

HDD customers are large and sophisticated buyers, such as HP and Dell. They do and will continue to benefit from strong purchaser power. They regularly source their HDDs from multiple suppliers and can easily switch between suppliers.

On the supply side, there are eight other HDD manufacturers who compete against Seagate and Maxtor in the overall HDD business, of which three in the enterprise HDD market. Manufacturers who are active in the production of HDDs for other applications face relatively low barriers to entry into the neighbouring HDD markets. Moreover, existing capacities in the different HDD markets can be extended without major cost and delay. In addition, the market shows a high rate of innovation, short product life-cycles and a continuous decline in prices.

As to potential vertical aspects of the merger, Seagate produces most of its components in-house, whereas Maxtor has up to now sourced from third parties. The merger will not lead to any significant reduction of the components markets if the merging parties make increased use of their internal component production. The market investigation has shown that demand for key components – such as heads and media – will not decrease substantially because, on the one hand many HDD producers combine internal and external sourcing and, on the other hand, the markets for HDD components are rapidly growing.
More information on the case can be found at:

http://ec.europa.eu/competition/mergers/cases/index/m83.html#m_4100