Iomega has reached a deal to buy sister hardware vendors indirectly owned by the Chinese government, in an effort to expand the company's product line.

Iomega will purchase ExcelStor Great Wall Technology, a Cayman Islands company, and Shenzhen ExcelStor Technology, a Chinese company, in a stock deal expected to close in mid-2008, said Thomas Kampfer, Iomega president and chief operating officer. The deal would nearly quadruple the size of Iomega, with its revenue going from $300 million a year to about $1.1 billion a year, and the number of employees growing from less than 300 to about 3,000, Kampfer said.

ExcelStor has built Iomega's Rev removable hard drive products since 2004, and more recently, it has built Iomega-branded USB hard drives, Kampfer said. The acquisition will help Iomega branch out into new products, he said, although the company isn't yet announcing what new products it's looking at.

"For quite some time we've felt that we have a really great brand," Kampfer said. "We've been searching for ways to expand our product line and gain access to more products, to move ourselves beyond external storage. We haven't had the resources - we haven't had the development resources, we haven't had the marketing resources. We just aren't big enough."

In the deal, Iomega will issue about 84 million shares of its stock, worth about $139 million, in exchange for all outstanding ExcelStor shares. The deal would be one of the first times a US company has acquired a company owned by the Chinese government, according to Iomega.

The boards of directors at both Iomega and ExcelStor have approved the deal. The purchase must be approved by the Chinese government and shareholders.

ExcelStor, which produces more than 20 million devices a year, designs and manufactures digital storage hardware, including hard drives and security storage products. The company sells its products under its own brand and also to original equipment manufacturers.
In 2006, ExcelStor had revenue of $707.1 million, according to Iomega.

ExcelStor is a subsidiary of Great Wall Technology Co. (GWT), a publicly traded company that manufactures computers and creates software and related products. GWT is an indirect subsidiary of China Electronics Corp., which is owned by the Chinese government.

After the deal is completed, GWT and its affiliates will own about 43 per cent of Iomega's stock, making GWT its largest shareholder. China Electronics indirectly owns 62 per cent of GWT.

Jonathan Huberman will continue as CEO of Iomega, and Kampfer will remain as president and COO, the company said. Eddie Lui, currently CEO of ExcelStor, will become executive chairman of Iomega.