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Adobe Agrees To Acquire Macromedia

By Matthew Fordahl
Associated Press
Tuesday, April 19, 2005; Page E05

SAN JOSE, Calif., April 18 -- Adobe Systems Inc. said Monday that it plans to acquire Macromedia Inc. in an all-stock transaction valued at approximately $3.4 billion, a move than would combine two of the largest makers of software for creating and delivering digital content.

Both companies said the long-rumored acquisition was not to consolidate and cut costs but to help Adobe expand into new markets, particularly in the area of providing content to mobile phones and other handheld devices. Macromedia is known for its Dreamweaver Web-design program and Flash, which animates and adds interactivity to Web pages.

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Adobe's software includes the popular Acrobat program for creating and reading documents in the PDF format, as well as the popular Photoshop program for working with digital photographs.

Macromedia, based in San Francisco, recently announced software for expanding its reach into mobile devices.

"This is not a consolidation play. This is all about growth," said Bruce Chizen, Adobe's chief executive. "We're doing this because we believe the combined offerings will be even more compelling to our customers given the challenges they're going to face in trying to communicate information in this very complex environment."

There is some product overlap, including Adobe Illustrator and Macromedia FreeHand in graphics design, Adobe GoLive and Dreamweaver for Web page creation, and Photoshop and Macromedia Fireworks for working with photos and other graphics.

Under terms of the deal, approved by the companies' boards of directors, Macromedia stockholders would receive 0.69 shares of Adobe common stock for every share of their Macromedia common stock.

That would result in Macromedia stockholders owning about 18 percent of the combined company when the deal closes.

Shares of Adobe fell $5.89, or nearly 10 percent, to $54.77, in trading Monday on the Nasdaq Stock Market. Macromedia shares gained $3.27, or nearly 10 percent, to $36.72.

The transaction, contingent upon the approval of regulators as well as the shareholders of both companies, is expected to be completed by the fall. The combined company plans to keep Adobe's name and San Jose headquarters.

Chizen is slated to be chief executive of the combined company.

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