Storage giant Seagate Technology (NASDAQ: STX) has agreed to buy Dot Hill Systems Corp. (NASDAQ: HILL), a maker of software and hardware storage systems, to accelerate the growth of its OEM-focused cloud storage and solutions business.

Seagate Technology is buying Dot Hill Systems in an all-cash transaction valued at $9.75 per share, or a total of approximately $694 million on a fully-diluted equity value basis. The deal has an enterprise value of about $645 million, Seagate is set to pay an 88 percent premium to Tuesday’s closing stock price. 

Seagate will leverage Dot Hill’s storage technology IP portfolio and software capabilities to drive innovation and provide incremental value to its combined OEM customer base. The company said Dot Hill\’s external storage array-based systems and software products will complement and expand its storage systems offerings and be offered as part of Seagate\’s Cloud Systems and Electronics Solutions. 

Phil Brace, President of Cloud Systems and Electronics Solutions at Seagate, said in a statement: “Dot Hill’s innovative storage systems and IP portfolio are a strategic addition to our storage technology portfolio, enabling us to accelerate the growth of Seagate’s OEM-focused cloud storage system and solutions business”, and also added that: “We are focused on providing the highest quality storage systems for our OEM customers and Dot Hill’s storage solutions will enable us to advance our strategic efforts. We look forward to welcoming Dot Hill’s strong team, which has proven experience in developing and delivering best-in-class storage solutions that are trusted by the world’s leading IT manufacturers and their channel partners, and we expect the transaction to be accretive to non-GAAP earnings in fiscal 2016.” 

Dana Kammersgard, CEO of Dot Hill Systems, said in a statement: “Seagate has a strong reputation in enterprise storage and is focused on building out its best-in-class storage system capabilities, making them the right home for the talented Dot Hill team”, and also added that: “Dot Hill’s customers will benefit from leveraging Seagate’s leading technology and infrastructure to accelerate the delivery of advanced solutions.” 

The deal, which is subjects to customary closing conditions including those required by the Hart-Scott-Rodino Improvements Act, is expected to close in the fourth calendar quarter of the year 2015.

Like other tech companies in the industry, Seagate Technology has been aiming to diversify its data storage offerings in the fast-changing marketplace. In 2014, It acquired Xyratex, a storage systems company. The same year it acquired the LSI storage controller chip business from Avago Technologies for $450 million. 

Headquartered in Longmont, Colorado, Dot Hill storage solutions support people accessing information, and machines collecting sensor data, all in real-time. It combines innovative intelligent software with the industry\’s most flexible and extensive hardware platform and simplified management to deliver best-in-class solutions. 

Wilson Sonsini Goodrich & Rosati served as the primary legal adviser to Seagate and Perella Weinberg Partners served as the financial adviser. Morgan Stanley & Co. LLC and Needham & Company, LLC served as financial advisers to Dot Hill while  Cooley LLP served as legal adviser.