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Imation Acquires Nexsan for $120 Million

Could it save a company losing money the past six years?

Imation Corp. has acquired privately held Nexsan Corporation, a Thousand Oaks, CA-based provider of disk-based storage systems.

As the company continues to execute its strategy, Imation is leveraging its storage core, building a platform for long-term growth and improving operating margins in high-growth storage and security solutions markets.

The acquisition of Nexsan brings to Imation a proven technology platform and a portfolio of disk-based and hybrid disk-and-solid-state storage systems with more than 11,000 existing customers worldwide. It is expected to accelerate Imation’s growth in the SMB and distributed enterprise (SME) storage markets. Imation will provide the Nexsan business with global scale and a well-known storage brand for global expansion. With SMBs and SMEs struggling to address their increasing storage and management needs, the combined Imation and Nexsan portfolio will offer customers an attractive, price / performance alternative to competitive offerings.

The combination cash-and-stock transaction included approximately $105 million in cash and 3,319,324 Imation common shares, the equivalent of approximately $15 million.

"Imation’s acquisition of Nexsan is an exciting next step in our strategic transformation, which includes investing in growth platforms in data storage and security solutions, where we are targeting markets with strong growth rates," said Mark Lucas, president and CEO of Imation. "Our strategy includes focusing on the underserved SMB market with purpose-built storage systems and appliances. This is a market that Nexsan knows well. Nexsan’s management team has grown this business from start-up to more than $80 million, with strong gross margins. Nexsan is a successful company that is addressing some of today’s fastest growing trends in storage, and we are pleased that its management team, including CEO Philip Black, will join Imation. The combination of Nexsan’s products, technologies, and talented teams with Imation’s global reach and infrastructure will be an excellent accelerator for our growth strategy in storage solutions."

"We are excited to have Nexsan become part of Imation," said Black. "Imation provides us the scale and global footprint to expand our business, while still keeping intact our award winning partner program, our strong management team and employees, and our innovative products and roadmap. We look forward to working as part of Imation to deliver compelling solutions that meet the growing storage, archive and compliance requirements of businesses worldwide. This is good news for Nexsan channel partners, employees and customers."

Nexsan’s 2011 revenues were $82 million and are continuing to grow, with gross margins in the 40% range. This acquisition is expected to be immediately accretive to Imation’s EBITDA.

Approximately 200 employees, based in the U.S., U.K. and Canada, have joined Imation with this acquisition. The Nexsan business will continue to operate within Imation from Nexsan’s current headquarters in Thousand Oaks, CA, under existing management. Integration and global expansion activities between Imation’s Tiered Storage and Security Solutions business and Nexsan will be determined in first quarter 2013.


This deal was not expected at all. Nexsan tried several times an IPO, in 2001 and 2008, and then in 2010 for $55 million, then withdrawn in 2012 citing unfavorable market conditions, rather than searching for a buyer. Last year Imation invested in storage, acquiring some assets of ProStor Systems, but mainly in security with the acquisition of encryptX and assets of MXI Security and IronKey.

Born in 1999, Nexsan got $40 million in total financial funding, last known round being $11 million in 2007. It has good - but not exceptional - technology in SATA HDD and SSD RAIDs, NAS, FC and ISCSI SAN (E-Series), as well as in secure archive systems (Assureon) for SMEs. Imation will benefit of new worldwide channel partners in storage subsystems.

Imation said that Nexsan's revenue was $82 million in 2011 but didn't reveal if the acquired firm is profitable. Last figures published: it booked $75 million in sales for the twelve months ended December 2010; 10,000th customer (vs. 11,000 today) and 28,000 storage systems delivered since 1999 announced in October 2011.

This acquisition is the biggest one since 2007 by Imation, entering into mid-range RAID subsystems where the competition is ferocious with all the storage giants in this field as well as a multitude of smaller vendors. It's the same with Nine Technology, in online backup full of vendors and acquired one year ago

We doubt that this new deal will stop in the short term the continuing loss of Imation since six years, following reduction in sales of computer media, its original business, and this operation will shortened its cash to around $80 million.

                     Nexsan's acquisitions

 Acquired firm Price
  2/2001  Springtek   NA  RAID
  5/2005  AESign
  NA  Fixed content
 storage software

              Imation's  former acquisitions

 Mo./Year  Acquired firm
 12/2003  Emtec magnetics
 (assets of)
  15  Magstar tape
  2/2006  Memorex
 329  Storage media
  5/2007  TDK (assets)  300  Recording
 branded products
  7/2007  Memcorp (assets)   64  Brand name
  3/2011  encryptX   2.3  Security software
 for external storage
  6/2011  MXI Security
 33.7  Secure portable
  8/2011  ProStor Systems
  0.9  Infinivault
 archiving systems
  9/2011  IronKey
 (assets of)
  19  Secure storage
 12/2011  Nine Technology
 (IP and assets)
  NA  Online backup
 with de-dupe