Avid Technology and Pinnacle Systems announced on Monday that Avid has entered into a definitive agreement to acquire Pinnacle in a cash and stock transaction. The acquisition is subject to satisfying a number of closing conditions, including shareholder and regulatory approvals, and is expected to close in the second or third quarter of 2005.
Under the terms of the agreement, Pinnacle shareholders will receive .0869 shares of Avid stock and $1.00 in cash for each Pinnacle share. At closing, it is expected that Avid will issue approximately 6.2 million shares and pay $71.3 million in cash, for a total estimated value of $462 million based on Avid’s stock price of $62.95 at market close on Friday, March 18, 2005.
However, that estimated value has dropped to $404.6 million in the three days since the announcement as Avid shares dropped from a close on Friday, March 18, 2005 of $62.95 to $53.76 (down 14.6%) while Pinnacle shares increased from a close on Friday, March 18, 2005 of $4.97 to $5.45 (up 9.7%) with profit taking on the Tuesday and Wednesday after the announcement on very heavy volume.
Following the closing, the parties expect that Pinnacle's professional products, such as the MediaStream broadcast playout server and the Deko on-air graphics system, will enhance Avid's end-to-end broadcast production pipeline. In addition, Pinnacle's consumer video business will form the basis for a new consumer video division at Avid, providing the company with an immediate avenue into that segment.
"We see this acquisition as the next logical step in our long-term strategy," said Avid president and CEO David Krall. "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."
Krall added that Pinnacle's professional product line will extend Avid's end-to-end broadcast solutions. "We think it would be hard to find a more complementary match for these two businesses than what this combination provides," he said.
Pinnacle chairman and CEO Patti Hart is confident the acquisition will strengthen Avid's business. "Our customers can also anticipate a richer set of offerings within an organization that will be even better positioned moving ahead," she said. "We see this as the right move for Pinnacle, and we look forward to joining the Avid family. "
