Avid Technology, the leading player in video and film editing tools, has revealed it is to buy rival video-editing maker Pinnacle Systems in a deal reported to be worth $462 million. The move is the latest in a series of buy-outs in the video market, as Avid and Apple Computer battle for the professional video high ground.
The purchase by Avid prices Pinnacle at a premium of 30 per cent above its market value, and is based on a stock and cash deal. Under the terms of the agreement, Avid says it will issue 0.0869 shares of Avid and $1 in cash for each Pinnacle share. Avid says it expects to issue around 6.2 million shares – around 15 per cent of its common stock.
The deal, which is subject to shareholder and regulatory approval, is expected to close in the second or third quarter of 2005, says Avid.
Pinnacle has long been a major player in the video-editing and broadcast arena. Its consumer business has shipped over ten million units, which will form the basis of a new consumer division at Avid. Avid says that Pinnacle's professional products, such as the MediaStream broadcast playout server and the Deko on-air graphics system, will be added to Avid's end-to-end production pipeline.
Avid president and CEO David Krall said: “We see this acquisition as the next logical step in our long-term strategy. Just as our acquisition of M-Audio in 2004 brought us into the consumer audio business, by acquiring Pinnacle’s consumer video business, Avid will be able to tap into the next generation of video editors while they are still learning their craft. This creates a very large potential customer base for Avid’s future. At the same time, we believe that Pinnacle’s professional broadcast offerings will fit seamlessly with Avid’s business, extending our end-to-end broadcast solutions with servers and on-air graphics products. We think it would be hard to find a more complementary match for these two businesses than what this combination provides.”
Krall added: “As a result of this transaction, we expect to derive savings from a number of sources, including reducing public company expenses, combining infrastructure functions where appropriate, and providing our global sales teams with a broader portfolio of product offerings. Over the past five years, Avid has increased its profitability and shareholder value by growing our top line, expanding our gross margins, and leveraging our talent and technology across the entire company. By working with the dedicated team at Pinnacle, we’re confident that, together, we can succeed with this same strategy following the completion of the transaction.”
Pinnacle chairman and CEO Patti Hart said, “We believe that this transaction creates significant value for our shareholders and provides excellent opportunities for continued growth for the combined company. Avid has built a strong, well-deserved reputation for efficient business management while continuing to live up to its tradition of technological innovation in the video and audio industries. By bringing our own award-winning products to the table – including Pinnacle Studio, Pinnacle Liquid Edition, and our broad array of broadcast systems – we’re confident that Pinnacle will strengthen and diversify Avid’s business. Our customers can also anticipate a richer set of offerings within an organization that will be even better positioned moving ahead. We see this as the right move for Pinnacle, and we look forward to joining the Avid family. ”
Avid will seek stockholder approval of the transaction at its annual meeting, and Pinnacle will hold a special meeting of shareholders to consider approval of the transaction. The dates of the shareholder meetings will be announced following completion of initial regulatory filings.
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