Graphics and publishing software specialists Adobe and Macromedia are to merge, the companies said today.
The acquisition will see the target firm's shareholders offered 0.69 Adobe shares for every Macromedia share, valuing the latter at $41.86 a pop, a premium over this past Friday's $33.45 closing price. The whole deal is valued at $3.4bn.
Both companies' boards have approved the deal, which will see Adobe CEO Bruce Chizen continue to run the joint operation, answering to a board led by Adobe co-chairmen and co-founder Charles Geschke and John Warnock. Macromedia's chairman, Rob Burgess, will also join the joint firm's board. Macromedia president CEO Stephen Elop will head the merged business' worldwide field operations. Adobe's Shantanu Narayen will stay on as president and COO. Murray Demo will remain executive VP and CFO.
Chizen said the merger will mean cost savings as the two companies' workforces are streamlined, but he stressed the motivation behind the merger was to expand and grow their business by integrating their respective product lines.
How that will pan out remains to be seen. It's not hard to imagine Macromedia's alternative to Adobe Illustrator, FreeHand, being phased out, for example. But Macromedia's ownership of Flash, the de facto web animation standard, when combined with Adobe's PDF e-document format, and the authoring tools that go with both media, will position the merged company as a powerhouse for graphics and publishing, both physical and electronic, going forward.
The acquisition, which is expected to close this coming Autumn, is subject to customary closing conditions, including approval by the stockholders of both companies and the nod from regulators.
The transaction will be accounted for under purchase accounting rules, the partners said. The transaction is currently expected to be break-even to slightly accretive to earnings in the first twelve months after closing on a non-GAAP basis assuming no adverse impact from the loss of deferred revenue in the first 12 months following the close due to purchase accounting, they said.
Adobe said it could not provide a forecast of the deal's impact on GAAP earnings due to "the absence at this time of estimates of the acquisition-related restructuring costs and the allocation of the purchase price between goodwill, in-process R&D, other intangibles and equity-based compensation expenses". ®