Server and data storage products maker Rackable Systems Inc on Wednesday said it agreed to acquire Silicon Graphics Inc, which filed for bankruptcy protection earlier in the day, for about $25 million in cash.
The Sunnyvale, California-based Silicon Graphics listed assets of $390.5 million and total debt of $526.5 million in its Chapter 11 filed in the United States Bankruptcy Court for the Southern District of New York, filings showed. Separately, in a regulatory filing with the US Securities and Exchange Commission, Silicon Graphics said it expects to pay off secured creditors with net proceeds from the sale.
Silicon Graphics had earlier filed for Chapter 11 in 2006, citing declining revenue and increased competition and emerged from bankruptcy the same year. The filing for bankruptcy constitutes an event of default under the senior secured credit agreement with Morgan Stanley Senior Funding Inc as administrative agent and revolving agent, Morgan Stanley & Co Inc as collateral agent, and the other lenders and credit parties, Silicon Graphics said.
Silicon Graphic's international operations would be part of the sale, but would not be part of the bankruptcy process, Rackable Systems said in a release. Subject to a number of closing conditions, including the approval of the bankruptcy court and other uncertainties, the transaction is expected to close within about 60 days, Rackable Systems said.
Rackable, which has its head office in Fremont, didn't say anything about layoffs or other changes following the merger. Silicon Graphics has about 1,200 people. Netscape-founder James Clark started it in 1982 and its computers contributed gee-whiz special effects to movies like ''Toy Story'' and ''Jurassic Park'' over the years. Most of its business has been aimed at government customers, however.
The company, which reported a wider second-quarter net loss of $49 million, had said in February that its heavy debt load were hurting the company's ability to win more business. It listed Voltaire Inc, Intel Americas and Qimonda as its largest creditors. The company said it hired Houlihan, Lokey, Howard & Zukin Capital Inc as financial advisor and investment bankers, and law firm Ropes & Gray LLP as its bankruptcy counsel.
Shares of Silicon Graphics fell 39 per cent to $0.25 in trading before the bell. They closed at $0.41 Tuesday on NASDAQ. Shares of Rackable Systems $4.06 Tuesday on NASDAQ.