Imation Corp is paying $300m in cash and stock for the TDK recording media business as it seeks a guaranteed source of consumer spending to counteract unpredictable NAND flash revenue.
The deal will make Tokyo, Japan-based TDK the largest shareholder in Imation and it will have the right to nominate a director. However, TDK has agreed not to increase its holding in Imation above 22%.
Imation said the business it is buying from TDK generated $670m in revenue in 2006, though it expects to report $575m to $600m once the business is integrated due to components it already supplies the company. Imation gains the right for 25 years to use of the TDK brand for recordable magnetic, optical, and flash media products. Once fully integrated, Imation believes the deal will add between $25m to $30m in annual operating income.
The NAND glut has hit Imation hard. In the first quarter its net income fell 19.1% to $15.7m on revenue that rose 25.9% to $421.9m.