Adobe to Acquire Macromedia

Adobe to Acquire Macromedia

2005
Apr
18

Combined Company to Deliver Industry-Defining Technology Platform for Rich, Interactive Content Press Release Adobe to acquire arch rival and web developement software leader Macromedia SAN JOSE, Calif. — April 18, 2005 — Adobe Systems Incorporated (Nasdaq: ADBE) today announced a definitive agreement to acquire Macromedia (Nasdaq: MACR) in an all-stock transaction valued at approximately $3.4 [...]

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Combined Company to Deliver Industry-Defining Technology Platform for Rich, Interactive Content

Press Release

Adobe and Macromedia logos
Adobe to acquire arch rival and web developement software leader Macromedia

SAN JOSE, Calif. — April 18, 2005 — Adobe Systems Incorporated (Nasdaq: ADBE) today announced a definitive agreement to acquire Macromedia (Nasdaq: MACR) in an all-stock transaction valued at approximately $3.4 billion.

The combination of Adobe and Macromedia will provide customers a more powerful set of solutions for creating, managing and delivering compelling content and experiences across multiple operating systems, devices and media. Together, the two companies will 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.

“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,” said Bruce Chizen, chief executive officer of Adobe. “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 $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 chief executive officer and Shantanu Narayen will remain president and chief operating officer. Stephen Elop, president and chief executive officer of Macromedia, will join Adobe as president of worldwide field operations. Murray Demo will remain executive vice president and chief financial officer. Dr. John Warnock and Dr. Charles Geschke will remain as co-chairmen of the Board of Directors of the combined company and 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.”

Integration

The two companies are developing integration plans that build on the cultural similarities and the best business and product development practices from each company. The companies will make additional details and information about the acquisition available at (here) .

“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.

The acquisition, which is expected to close in Fall 2005, is subject to customary closing conditions, including approval by the stockholders of both companies and regulatory approvals. The transaction will be accounted for under purchase accounting rules.

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 related to SFAS 123R, Adobe is currently unable to provide GAAP estimates on future earnings.

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. The company’s target of break even-to-slightly accretive to earnings on a non-GAAP basis assumes no adverse impact from the loss of deferred revenue in the first twelve months following the close due to purchase accounting.

Stock Repurchase Program

Adobe also announced its Board of Directors has approved a post-acquisition stock repurchase program of $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.

Conference Call

The management teams of both companies will host a financial analyst and investor conference call today at 8:00 a.m. ET (5:00 a.m. PT). The call can be accessed at 888-278-5324 (U.S.) or 706-643-3100 (outside U.S.) with conference call ID #5643249. A live Webcast of the call will also be provided at www.adobe.com/ADBE and www.macromedia.com/MACR . For those unable to listen to the live conference call, a telephone replay will be available at 800-642-1687 (U.S.) or 706-645-9291 (outside U.S.) with conference call ID #5643249. The telephone replay will be available beginning April 18, 2005 at 9:00 a.m. ET through April 20, 2005 at 12:59 p.m. ET. A Webcast archive will also be available on each company’s investor relations Web site.

About Adobe Systems Incorporated

Adobe is the world’s leading provider of software solutions to create, manage and deliver high-impact, reliable digital content. For more information, visit www.adobe.com .

About Macromedia

Experience matters. Macromedia is motivated by the belief that great experiences build great businesses. Our software empowers millions of business users, developers, and designers to create and deliver effective, compelling, and memorable experiences – on the Internet, on fixed media, on wireless, and on digital devices.

Forward Looking Statements

This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. Forward-looking statements in this press release include, without limitation, forecasts of market growth, future revenue, benefits of the proposed merger, expectations that the merger will be accretive to Adobe’s results, future expectations concerning available cash and cash equivalents, Adobe’s expectations with respect to future stock repurchases following the merger, including the timing and amount of such repurchases, and other matters that involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to differ materially from results expressed or implied by this press release. Such risk factors include, among others: difficulties encountered in integrating merged businesses; uncertainties as to the timing of the merger; approval of the transaction by the stockholders of the companies; the satisfaction of closing conditions to the transaction, including the receipt of regulatory approvals; whether certain market segments grow as anticipated; the competitive environment in the software industry and competitive responses to the proposed merger; and whether the companies can successfully develop new products and the degree to which these gain market acceptance. Actual results may differ materially from those contained in the forward-looking statements in this press release. Additional information concerning these and other risk factors is contained in Adobe’s and Macromedia’s most recently filed Forms 10-K and 10-Q.

Adobe and Macromedia undertake no obligation and do not intend to update these forward-looking statements to reflect events or circumstances occurring after this press release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement.

Additional Information and Where to Find It

Adobe Systems Incorporated intends to file a registration statement on Form S-4, and Adobe and Macromedia, Inc. intend to file a related joint proxy statement/prospectus, in connection with the merger transaction involving Adobe and Macromedia. Investors and security holders are urged to read the registration statement on Form S-4 and the related joint proxy/prospectus when they become available because they will contain important information about the merger transaction. Investors and security holders may obtain free copies of these documents (when they are available) and other documents filed with the SEC at the SEC’s web site at www.sec.gov . In addition, investors and security holders may obtain free copies of the documents filed with the SEC by Adobe by contacting Adobe Investor Relations at 408-536-4416. Investors and security holders may obtain free copies of the documents filed with the SEC by Macromedia by contacting Macromedia Investor Relations at 415-252-2106.

Adobe, Macromedia and their directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Adobe and Macromedia in connection with the merger transaction. Information regarding the special interests of these directors and executive officers in the merger transaction will be included in the joint proxy statement/prospectus of Adobe and Macromedia described above. Additional information regarding the directors and executive officers of Adobe is also included in Adobe’s proxy statement for its 2005 Annual Meeting of Stockholders, which was filed with the SEC on March 14, 2005. Additional information regarding the directors and executive officers of Macromedia is also included in Macromedia’s proxy statement for its 2004 Annual Meeting of Stockholders, which was filed with the SEC on June 21, 2004 and Macromedia’s proxy statement for a Special Meeting of Stockholders, which was filed with the SEC on October 6, 2004. These documents are available free of charge at the SEC’s web site at www.sec.gov and from Investor Relations at Adobe and Macromedia as described above.

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14 Responses Discussing “Adobe to Acquire Macromedia”
  1. And thus ends the era of innovation. With acquistion comes the hiiden motive “Take what we give, at our price, don’t crib, we are a large company now!!”

    #1
    18 Apr 2005
    10:33 PT
  2. I think this can be a very good move for us as consumers. What GoLive lacked it can pick up from DreamWeaver. Hopefully this move can make some very powerful products.

    #2
    18 Apr 2005
    10:46 PT
  3. I’m with Ammon. I think this will turn out to be beneficial to the market place.

    I’ll try to get a story up with my predictions soon… In between reviewing postcard competition entries, my book,… :-)

    #3
    18 Apr 2005
    13:55 PT
  4. One more bad news for Quark

    #4
    18 Apr 2005
    21:28 PT
  5. Sorry but this news has me reconsidering my recent move to Indesign.If we thought Quark was cocky – just wait for this new mega-company.Competition is good for the marketplace – not monopoly.

    #5
    19 Apr 2005
    07:12 PT
  6. This is a great thing, web developer and design creative suite, video and sound editing creative suite, and graphic design creative suite. More ability to create consumer and professional softeware.

    #6
    19 Apr 2005
    09:36 PT
  7. I’m with Mike: The combination of the two companies’ expertise and technologies will ultimately benefit consumers.

    Moreover, with both Microsoft and Apple growing into larger threats against both Adobe and Macromedia, a combined Adobe-MM will able to mount a much stronger defense than either could do alone or even as a strategic alliance.

    I imagine there were quite a few expletetives being shouted in both Redmond and Cupertino yesterday morning .

    #7
    19 Apr 2005
    12:03 PT
  8. This deal is Adobe trying to “beef up” against Microsoft and is web-centric, not print-centric. And, no matter what, Microsoft will still dominate the OS market, from which all other soft tools spring.

    Adobe paid 44x earnings and 7x sales, a high ratio. The bid was also at a 25% premium, although Abode stock immediately dropped 20% or so.

    Adobe’s focus will now be North as they gird for battle. Adobe won’t even be looking at this (i.e. layout tool) marketspace.

    Integrating two completely different code bases is a daunting task. It will take at least 180 days to have any good degree of integration and at least three times that for the current level of integration Adobe has in the Creative Suite.

    I google-newsed this and didn’t find one mention of InDesign in about 6 different publications. Check it out.

    Full disclosure: I am a Quarkian, but my comments have nothing to do with the main subject of this website. They only concern this subject.

    #8
    19 Apr 2005
    16:22 PT
  9. Thanks for the comment, Brett.

    I’m afraid, though, that I don’t understand what you mean by: “I google-newsed this and didn’t find one mention of InDesign in about 6 different publications. Check it out. ” Do you mean there was no mention of InDesign regarding the Adobe-Macromedia merger?

    I would think there would be; Macromedia doesn’t make products that print.

    #9
    19 Apr 2005
    22:35 PT
  10. In seauel to my original comment, the giant company cannot afford to have competitive products under its belt – its a predicament for Sales, Maketting, Operations, Technicians, User Interface Architects, Engineers, and not just us – Designers on what to FOCUS. This has happened with Adobe’s past acquisition and I see no reason why its not gonna happen now. Kill the no.2 product from revenue perspective & gain the market, Who cares about the utility value of the tools !!.

    So as one site mentioned this is what may happen as Heads – Nod (no mention about a Roll) in San Jose / San Fransisco:

    > Freehand is discontinued. Illustrator integartion with the code would be just too much work.
    > Dreamweaver reigns supreme, GoLive is Go-ne Dead. However, integrating Dreamweaver into the Adobe Creative Suite will be tricky/uphill task.
    > Fireworks will slowly vaporise. Photoshop reigns, but at the stake of vector-orientation of Fireworks which just doesn’t mesh with Photoshop’s workflow.
    > Director — Who needs it anyway ?

    At the expense of Flash, we loose choices of 4 products, and a uneasy messed up workflow called Suite, without mentioning the host of Engrs/Technicians left hight and dry either at SJ or SF.

    But I guess there’s hope with Quark’s steady & rhobust technology (splashed all across in the latest XRay magazine).

    #10
    20 Apr 2005
    12:16 PT
  11. OK some people will lose there jobs, thats life, its happened to me, I was a victim of a corporate shift and now I have a better job, the talent of those will not go un-noticed and they will continue to thrive in this ever growing tech business. I wish I had a resume that has macromedia or adobe on it. As for the apps we will have to see what happens, Adobe has always created high quality apps as well as macromedia. These people arent stupid they care about the consumer unlike quark. And for those who think this is a monopoly, Thats crazy! Youve got Corel, Microsoft, and tons of great open source apps like The Gimp that are free. Its easy to be negative about change but were does that get you?
    Quark who?
    Peace out

    #11
    22 Apr 2005
    11:36 PT
  12. > Director — Who needs it anyway ?

    AFAIK, Director and Authorware are still the standards in the computer-based training field, just as FrameMaker is in the technical writing and publishing field. FrameMaker hasn’t had much attention paid to it since Frame was acquired by Adobe. I’ll believe that the Adobe/MM merger is “good for consumers” when we get FrameMaker upgraded and ported to OS X.

    Until then, I suspect Macromedia’s products that aren’t at the core of what Adobe wants (Flash and maybe Dreamweaver) will be dropped.

    Until the Next Big Thing comes along that Adobe wants, Flash & Dreamweaver will be milked for all they’re worth moneywise with little innovation or competition.

    This is Aldus PageMaker all over again. Where are SuperPaint and Persuasion today?

    #12
    24 Apr 2005
    19:36 PT
  13. I love adobe and macromedia and sadly this move shocked and disappointed me. I didn’t feel that the two companies were necessarily adversaries, but it was nice to see that two companies could produce good products that benefited the creative workflow of the consumers… especially in the (big-bad) world of Microsoft.

    I find myself a little wary of this merger… in which Adobe comes out topes, but at the same time I agree with Mike that these companies still seem to have a creative ‘mission’ and for that the design industry can be truly gratefully. Hopefully something good will come out of it, but I think the biggest plus may not be the current improvement of stock products but a future killer app that genuinely combines the forces of print and web. Now that would be a program worth merging for.

    #13
    01 May 2005
    02:38 PT
  14. [...] As Adobe and Macromedia await word of DOJ rulings on the impending merger and what will become of the companies’ competitive products, both move forward with stockholder votes. But if applications–DreamWeaver, GoLive, FreeHand, FireWorks, or Homesite–have to sell, whose likely to buy?[...]

    21 Jul 2005
    14:13 PT
    #14

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