April 18 (Bloomberg) -- Adobe Systems Inc., the world's largest maker of graphic-design software, agreed to buy Macromedia Inc. for about $3.4 billion to add Flash Web-design programs to its offerings.
San Jose, California-based Adobe will pay 0.69 share, worth $41.86 at Friday's close, for each Macromedia share, Adobe said in a statement today. The transaction values San Francisco-based Macromedia at 25 percent more than Friday's closing price.
Macromedia's Flash Player, which displays moving images and sound on Web pages, is installed in more than 98 percent of Internet-connected desktop computers. By buying Macromedia, Adobe Chief Executive Bruce Chizen, 49, is reducing reliance on his flagship Acrobat software, used by graphics professionals.
``Strategically, it makes a lot of sense,'' said Stuart O'Gorman, who helps manage $700 million of technology stocks including shares in Adobe and Macromedia at Henderson Global Investors in London. ``It gives them a very broad-based suite of products.''
Adobe also said today it expects fiscal second-quarter profit to be at the high end of its forecasts after ``strong demand'' for Acrobat, which lets users create, view and print documents.
Adobe said the Macromedia purchase, Adobe's biggest-ever takeover, brings together two ``complementary'' products. Adobe is paying 43.8 times operating profit and 7.5 times sales for Macromedia, according to data compiled by Bloomberg.
Chizen said in the statement ``the primary motivation'' for the deal ``is to continue to expand and grow our business into new markets.''
Stock Buyback
The company said it expects the transaction to be ``break- even to slightly accretive to earnings'' in the first 12 months. It expects the deal to close in the fall of this year. Adobe also plans to buy back $1 billion of stock after the purchase.
Spokeswoman Jodi Warner declined to give further details until the company's press conference scheduled for 8 a.m. New York time.
Adobe shares traded at the equivalent of $58.53 at 10:04 a.m. in Germany, down 3.5 percent from Friday's close, on volume of 1,187 shares. Macromedia traded at the equivalent of $39.32, up 19 percent from Friday, on volume of 791 shares.
Macromedia Chief Executive Stephen Elop, who was promoted from chief operating officer in January, will join Adobe as president of worldwide field operations. The company, founded in 1992, employs about 1,500 workers. Adobe is 10 years older than Macromedia.
In January Macromedia said fiscal third-quarter sales climbed 15 percent to $108.6 million. Net income in the three months ended December was $15.3 million compared with $10.3 million a year earlier.
Adobe said last month it expected earnings per share for the fiscal second quarter ending June 3 of 51 cents to 55 cents from sales of between $475 million and $495 million. First-quarter profit rose 23 percent after demand for the company's Acrobat product drove sales to a record.
