Adobe splash the cash for Flash creator Macromedia

Adobe splash the cash for Flash creator Macromedia

By Stuart Finlayson

Apr 19, 2005: Desktop applications vendor Adobe Systems is set to acquire Macromedia in a US$3.4 billion all-stock transaction.

The deal is aimed at providing customers with a more comprehensive set of products for creating, managing and delivering content across multiple operating systems, devices and media. Additionally, the two companies stressed the merger will help them to meet a wider set of customer needs and have a significantly greater opportunity to grow into new markets, particularly in the mobile and enterprise segments.

In a conference call held in the immediate wake of the announcement of the multi-billion dollar deal, Adobe CEO Bruce Chizen said the move was made to fulfil market needs.

"Customers are calling for integrated software solutions that enable them to create, manage and deliver a wide range of compelling content and applications - from documents and images to audio and video. By combining our powerful development, authoring and collaboration software - along with the complementary functionality of PDF and Flash - Adobe has the opportunity to bring this vision to life with an industry-defining technology platform."

Under the terms of the agreement, which has been approved by both boards of directors, Macromedia stockholders will receive, at a fixed exchange ratio, 0.69 shares of Adobe common stock for every share of Macromedia common stock in a tax-free exchange. Based on Adobe's and Macromedia's closing prices on Friday, April 15, 2005, this represents a price of US$41.86 per share of Macromedia common stock. Upon the close of the transaction, Macromedia stockholders will own approximately 18 percent of the combined company on a pro forma basis.

In the combined company, Chizen will continue as CEO and Shantanu Narayen will remain president and chief operating officer. Macromedia's president and CEO, Stephen Elop will join Adobe as president of worldwide field operations. Rob Burgess, chairman of the Macromedia board of directors, will join the Adobe board.

"Both Macromedia and Adobe are passionate about creating and enabling great experiences across a wide range of devices and operating systems," said Elop. "Our combined teams will be a powerful force for innovation around cutting-edge platforms for delivering content and applications."

The two companies are developing integration plans that build on the cultural similarities and the best business and product development practices from each company.

"While we anticipate the integration team will identify opportunities for cost savings by the time the acquisition closes, the primary motivation for the two companies' joining is to continue to expand and grow our business into new markets," said Chizen.

Adobe also announced that its board has approved a post-acquisition stock repurchase program of US$1 billion. "After a review of the combined companies' financial position, our board concluded that the repurchase program is consistent with our overall commitment to deliver value to our stockholders," Chizen added.

The repurchase program is in addition to the Adobe's existing stock repurchase programs and is expected to commence following the completion of the acquisition. The repurchases will be funded from available working capital.

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