Imation and Memorex have announced that they have entered into a definitive agreement under which Imation will acquire Memorex in an all cash transaction for $330 million (£190m).
Additional cash consideration ranging between $5 million and $45 million would be paid out over a period of up to three years after close, contingent on financial performance of the purchased business. The Boards of both companies have approved the transaction.
“This acquisition is a major strategic milestone for Imation, as we implement our profitable growth strategy. It is also a win-win for both companies’ customers and shareholders,” said Bruce Henderson, Imation Chairman and CEO.
“We are gaining a powerful consumer brand and global market share leader in recordable CDs and DVDs as well as an experienced management team under the leadership of Mike Golacinski. Added to our technology expertise, strong B2B brand, global footprint, broad product portfolio and industry experience, we are creating a new global powerhouse in the data storage industry.”
Michael Golacinski, President and CEO of Memorex International, Inc, will head up Imation’s consumer business, maintaining the Memorex headquarters in Cerritos, CA. A consumer electronics industry veteran, Golacinski was an executive with Maxell Corporation prior to joining Memorex in 1997.
He stated: “I am excited about the opportunity to join Imation and extend the Memorex brand -- which has built customer loyalty for over 40 years as a leader in high quality recordable media – as well as to strengthen the Imation brand in the consumer sector. Now with the focus and resources of a global data storage leader behind us, we can extend our reach into new regions – particularly in Europe -- enhance and expand the product portfolio and grow both brands.”
In Memorex’s fiscal 2005, ended March 31, the company reported revenue of $430 million and operating income of $30 million. In the subsequent two quarters, ending September 30, 2005, Memorex’s revenue totaled $205 million and operating income totaled $14 million. After completion of integration, Imation expects Memorex to be significantly accretive adding approximately $32 million to $36 million in annualized operating income and approximately $0.40 to $0.47 earnings per share.
This estimate includes synergy benefits, purchase price amortization expenses and the assumed loss of interest income due to cash used in the acquisition. Imation anticipates significant synergy benefits, from operating efficiencies including expense reductions, purchasing, and supply chain benefits. The full integration of Memorex into Imation which will result in these benefits is anticipated to be completed by the end of 2006.
