Shareholders Approve Adobe Merger . . .
Stock Asylum Staff Report
August 24, 2005
Stockholders of Adobe Systems and Macromedia, Inc., have approved a
proposed $3.4 billion merger, moving the two companies a step closer
to creating a truly dominant player in the area of communications and
graphics software.
The vote at both companies was overwhelmingly in favor of the merger with 99 percent of the Adobe votes going for the merger and 99.8 percent of Macromedia votes in favor. Seventy-five pecent of outstanding Adobe shares were represented in the vote count while 73.2 percent of outstanding Macromedia shares were represented in that company's tally.
The two firms hope to conclude the merger during the fall, but the proposed union still must clear regulatory hurdles in the United States, Europe and elsewhere.
Antitrust laws could come into play, especially in areas where the two companies compete head-to-head with similar products.
In fact, Adobe reported in July that the U.S. Department of Justice (DOJ) has asked for additional information about the Adobe and Macromedia web authoring and vector graphics products, indicating possible concerns in these two important areas.
Adobe's Illustrator (a vector illustration program) competes with Macromedia's Freehand among graphic designers and illustrators. Macromedia's Dreamweaver and Adobe's GoLive compete strongly among web site developers. The absence of any of these quality products would clearly damage the competitive landscape in communications software.
Interestingly, Adobe almost acquired Freehand in 1994 when it merged with Aldus. On that occasion, the U.S. Federal Trade Commission forced the combined company to divest Freehand. The software title went to Altsys, which sold it to Macromedia a year later.
An Adobe spokesperson said the Department of Justice often requests additional information in large mergers like this.
"We’ve been working closely with the DOJ to provide all the information they need." said Jodi L. Warner, a senior manager of corporate public releations at Adobe. "We’ve stated both publicly and in communications with the DOJ that we do not believe there are anti-competitive issues related to the merger."
Adobe and Macromedia say the merger offers advantages for the companies, their stockholders and for communication professionals who use the web authoring and vector programs along with an array of widely-used products like Photoshop, Flash, InDesign, Acrobat, and others.
In communicating with shareholders, the two Northern California companies said "Adobe and Macromedia believe that the two companies together can meet more or our customers' needs by integrating our products and technologies to help our customers communicate better. We believe the combined company has the opportunity to define a robust technology platform that delivers compelling, rich content across a wide range of devices and operating systems. Moreover, we believe that the software industry is in a period of consolidation and that there is a developing trend for customers to source a large portion of their software needs to a smaller number of suppliers. We believe that the combined company will have the scale to better compete in this environment."
The companies said customers will profit from increased software functionality resulting from the integration of existing technologies and from new products brought to market by the combined "technological resources" of the merged entity.
Adobe, in particular said the merger would aid its long-term strategy to grow into new markets and to compete effectively. The company specifically mentioned "Microsoft's position" in the graphics and communications software market. Microsoft has released some products in this area, but has yet to produce a serious threat to Adobe's position at the head of the segment.
Adobe and Macromedia admitted the merger could create some problems, including difficulties integrating the two product lines, troubles merging the two organizations, failure to retain key personnel and/or a decline in sales ". . . if customer relationships are disrupted by the merger."
If the merger goes through, Macromedia shareholders will receive 1.38 shares of Adobe Systems for each share of Macromedia, representing, in total, about 17.5 percent of all Adobe common stock after the merger.
Adobe is at: http://www.adobe.com
Macromedia is at: http://www.macromedia.com
