Adobe to Acquire Macromedia for $3.4B

Adobe Systems Incorporated today announced a definitive agreement to acquire Macromedia in an all-stock transaction valued at approximately $3.4 billion.

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.

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 http://www.adobe.com/aboutadobe/invrelations/adobeandmacromedia.html.

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.

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.