American computer storage company Iomega has announced that it will purchase ExcelStor, China's only domestic hard-drive manufacturer, for a price of USD 306 mln. The move is seen as an indication of Iomega's determination to enter the Chinese market.
President and CEO of Iomega, Thomas Kampfer, stated that the purchase would be completed around the middle of 2008, and the deal would increase Iomega's annual operating revenues from USD 300 mln to around USD 1.1 bln. It would also increase staff levels, which are currently less than 300, to around 3000.
ExcelStor is a subsidiary of Great Wall Technology (GWT). If the purchase agreement is successful, GWT and its affiliated companies will own around 43% of Iomega's common stock. Of this, the China Electronics Corporation (CEC), which owns 62% of GWT through one of its subsidiaries, will directly own 27%, and in reality also control GWT's stake in Iomega. Some analysts believe that this deal is really just a round-about way for GWT to register on the New York Stock Exchange.
In 2006, ExcelStor had sales revenues of USD 707 mln and a net profit that was greater than Iomega's. The deal between the two companies is expected to help improve Iomega's profits.