MOC conditionally OKs Seagate-Samsung HDD deal

Updated: 2011-12-13 11:17


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BEIJING - The Chinese Ministry of Commerce (MOC) on Monday conditionally endorsed the acquisition of Samsung Electronics' hard disc drive (HDD) business by the United States' Seagate Technology, clearing the path for the two brands' alignment in China.

The merger will have a negative impact on the interests of Chinese consumers as China has become one of the world's largest personal computer markets, the MOC said in a statement on its website.

Although the merger will have an effect of excluding or limiting competition in the market, the MOC said it approved the deal after Seagate and Samsung agreed to come up with solutions to reduce the negative impact on competition.

The MOC ruling came after two extensions of an anti-monopoly review of the acquisition since Seagate submitted its application in China more than six months ago.

During the review period, the MOC found that the global HDD market was highly concentrated, with the market shares of Seagate, Western Digital, Hitachi, Toshiba and Samsung reaching 33 percent, 29 percent, 18 percent, 10 percent and 10 percent, respectively.

According to the MOC statement, Seagate should keep the Samsung brand as an independent competitor for at least one year and continue to expand production capacity under the Samsung brand within six months of the MOC ruling.

Seagate should not use its market status to substantially transform the current business model by forcing customers to purchase their HDD products, said the statement.

Specifically, the MOC prohibited Seagate from compelling TDK China Co., Ltd. to exclusively supply recording heads for hard drives to Seagate and its affiliated companies, or limiting its supplies to other HDD manufacturers.

Seagate promised to invest at least $800 million annually in R&D and renovation to offer more creative products and solutions to customers in the three years following the MOC ruling.

Seagate should appoint an independent fiduciary to supervise the fulfillment of its obligation, said the statement.

In April this year, Seagate struck a deal with Samsung to buy Samsung's HDD business for $1.375 billion in cash and stock.