Graphic-design software maker Adobe Systems Inc. has agreed to buy Flash developer Macromedia Inc., the maker of Dreamweaver and Flash web-design software, for US$3.4 billion in stock, the companies announced Monday.
Under the terms of the merger, which has already been approved by both boards, San Jose, California-based Adobe Systems will pay 0.69 of its own shares for each Macromedia share. After the deal, Macromedia?s stockholders will own approximately 18% of the combined company on a pro forma basis.
The deal values Macromedia?s share at $41.86, 25% higher than Friday?s closing price of $33.45. Adobe also plans to buy back $1 billion of stock after the purchase. Adobe Systems? CEO, Bruce Chizen, will retain his position, while Macromedia?s Stephen Elop will become president of worldwide field operations, Adobe announced.
"The primary motivation for the two companiesi joining is to continue to expand and grow our business into new markets,ii Chizen said in the statement. The company said it expects the transaction to be "break- even to slightly accretive to earnings" in the first 12 months. It expects the deal to close in the fall of this year.
Adobe said second-quarter earnings and revenue would be at the high end of previous guidance. It also announced a $1 billion stock repurchase program to start after the deal has been completed.
Immediateis question arise as to what could happen to various software products of both companies that have been fierce rivals over the years. In a prepared statement, the two companies emphasized they are currently developing integration plans "that build on the cultural similarities and the best business and product development practices from each company." The statement did not elaborate on those plans or the future of certain products.
"While we anticipate the integration team will identify opportunities for cost savings by the time the acquisition closes, the primary motivation for the two companiesi joining is to continue to expand and grow our business into new markets," Mr. Chizen said.
The deal still requires shareholder and regulatory approval.
Adobe Spokeswoman Jodi Warner declined to give further details until the companyis press conference scheduled for 8 a.m. EST, Monday.