Imation to Acquire Memorex
January 23, 2006
Oakdale, MN - Imation Corp and Memorex International, Inc. jointly announced that they have entered into a definitive agreement under which Imation will acquire Memorex International in an all cash transaction for $330 million. 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.
Transaction Details and Timing
Imation intends to fund the transaction with cash and has adequate cash on hand, which totaled $507.6 million at December 31, 2005, to both fully fund the acquisition and to meet current operating needs. Imation is in the process of establishing a new and expanded credit facility of $200 million to $250 million which is expected to be in place by the close of the transaction. The transaction is subject to customary closing conditions and regulatory approvals as well as approval by the shareholders of Hanny Holdings, a Hong Kong-based company listed on the Hong Kong Stock Exchange. Hanny Holdings and Investor Asia Ltd., a private equity firm, which together hold 67 percent of Memorex shares, have agreed to vote their shares in favor of the transaction. The sale is expected to close by the middle of the second quarter of 2006. Merrill Lynch acted as exclusive financial advisor and Dorsey & Whitney LLP as exclusive legal advisor to Imation in connection with the transaction.
About Imation Corp
Imation is a provider of removable data storage media products designed to help customers capture, create, protect, preserve and retrieve valuable digital assets. Its business-to-business customers range from managers of large data centers to distributed network administrators to small business owners who rely on Imation tape cartridges for data processing, security, business continuity, backup and archiving applications. For their personal storage needs, Imation customers rely on Imation's recordable optical discs, USB-enabled flash and removable hard drives to store, edit and manage business data, photos, video, images and music on professional and home desktops. With a legacy in data storage reaching back more than 50 years, Imation says they have the track record, technology capability, partnerships, and vision to lead the industry into the future.
Additional information about this transaction and Imation is available at
Imation
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