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Monday, April 18, 2005, 05:40 am PT (08:40 am ET)

Adobe to acquire Macromedia for $3.4B

Adobe Systems has 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. That is a 25 percent premium to Macromedia's closing price of $33.45 on Friday. Upon the close of the transaction, Macromedia stockholders will own approximately 18 percent of the combined company on a pro forma basis.

"By combining the passion and creativity of two leading-edge companies, we will continue driving innovations that are changing the ways people everywhere are experiencing and interacting with information, Adobe said it in a prepared statement.

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 Stephen Elop, president and chief executive officer of Macromedia. "Our combined teams will be a powerful force for innovation around cutting-edge platforms for delivering content and applications."

According to CBS Marketwatch, Adobe said second-quarter earnings and revenue would be toward the high end of previous guidance due to strong demand for Acrobat. The company had been expected earnings per share between 51 cents and 55 cents and revenue of between $475 million to $495 million.

Separately, Macromedia said it expected net revenue for its fourth fiscal quarter to exceed the $108 to $113 million guidance it provided in January.

Along with the acquisition, Adobe also announced a $1 billion stock repurchase program to start after the Macromedia deal has been completed.

"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.