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Imation to Acquire Memorex

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Imation to Acquire Memorex

Postby Ian on Thu Jan 19, 2006 5:44 pm

Imation to Acquire Memorex

Leading Consumer Brand for Recordable Media Adds to Imation’s Global Technology Engine;

Financially Accretive Transaction Expected to Contribute $32 to $36 million in Annual Operating Income After 2006 Integration;

All Cash Purchase for $330 Million Plus Contingent Payments of up to $45 Million


OAKDALE, MN (January 19, 2006) -- Imation Corp (NYSE:IMN) and Memorex International, Inc, today 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.

A teleconference for the financial community and news media discussing the acquisition and Imation 2005 earnings is scheduled for 7:30 a.m. Central Standard Time (8:30 a.m. EST) tomorrow, January 20, 2006. (See full details below.)

“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.

Web cast and Replay Information
The management teams of both companies will host a teleconference for the financial community, news media and interested investors at 7:30 a.m. Central Standard Time (8:30 a.m. EST) tomorrow. Imation will also discuss fourth quarter 2005 earnings previously scheduled for January 25, at the same teleconference. The call-in number is 866-253-6509 (U.S.) or 703-639-1208 (outside U.S.) A live web cast, including presentation slides, of the teleconference will be available on the Internet on a listen-only basis at ir.imation.com or www.streetevents.com. A taped replay of the teleconference will be available beginning at 1:00 p.m. Central Standard Time on January 20, 2006, until 5:00 p.m. Central Standard Time on January 26, 2006, by dialing 866-219-1444 (access #841868). All remarks made during the teleconference will be current at the time of the call and the replay will not be updated to reflect any subsequent developments.

Additional Information and Where to Find It
Additional information about Imation and this transaction is available at www.imation.com. Additional information about Memorex is available at www.Memorex.com.

About Imation Corp
Imation is the world's leading provider of removable data storage media products designed to help customers capture, create, protect, preserve and retrieve valuable digital assets. Our 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, our 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 has the track record, technology capability, partnerships, and vision to lead the industry into the future.

About Memorex
Founded in 1961 as a manufacturer of recordable magnetic tape for data storage, Memorex launched the audiocassette in 1971 and created one of the most memorable brand images in advertising history with jazz singer Ella Fitzgerald’s voice breaking a glass and the tag line “Is it live or is it Memorex?” The success of that campaign put Memorex solidly in the American consumer brand memory where it still is among the most recognized and respected brands today. Memorex’s consumer business was acquired by Tandy Corp. in 1982 and then again by Hanny Holdings in 1993. In 1996 the Company launched recordable CDs into the mass consumer market. The current portfolio includes recordable CDs and DVDs, which constitute more than two thirds of the Company’s 2005 revenue; branded accessories at about 15 percent; USB flash drives at about 10 percent; with magnetic and optical drives at about five percent. The Company has been the North American market share leader in retail sales for the past six years in the CD category and four years in the DVD category.

Risk and Uncertainties
Certain information contained in this press release, which does not relate to historical financial information, including the business outlook, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause the Company's actual results in the future to differ materially from its historical results and those presently anticipated or projected. The Company wishes to caution investors not to place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update such statement to reflect events or circumstances arising after such date. Among these factors is the Company’s ability to close the acquisition of Memorex in a timely manner, integrate its operations and achieve anticipated benefits and cost synergies, continuing uncertainty in global economic conditions that make it particularly difficult to predict product demand, the Company's ability to meet its cost reduction and revenue growth targets, its ability to introduce new offerings in a timely manner either independently or in association with OEMs or other third parties, its ability to achieve the expected benefits in a timely manner from the Moser Baer and other strategic relationships, including the Global Data Media joint venture, the competitive pricing environment, foreign currency fluctuations, the outcome of litigation, its ability to secure adequate supply of certain high demand products, the ready availability and price of energy, availability of key raw materials or critical components, the market acceptance of newly introduced product and service offerings, the rate of decline for certain existing products as well as various factors set forth, from time to time, in the Company's filings with the Securities and Exchange Commission.
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Postby Ian on Thu Jan 19, 2006 5:56 pm

A little surprising, no?

You gotta wonder how this will affect Memorex's product line.
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Postby dolphinius_rex on Thu Jan 19, 2006 6:20 pm

HOLY CRAP!!!!!

Man, that's even more surprising then the attempted merger between Optodisc and Prodisc! :o

EDIT:

My friend and co-worker David was heard to remark:
"Is it LIVE or is it Memorex?"

may be superceded by

"Is it IMATION or is it Imitation"


I think it's a catchy slogan... and makes more sense then the original Memorex one anyways :P
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Postby Justin42 on Fri Jan 20, 2006 6:55 pm

Yay, two companies who I avoid like the plague merge, so I only need to worry about avoiding one. ;)

Ok, that's a little harsh, Memorex makes some decent stuff. But for their media, both have pretty much gone to crap (I found some ooooold Memorex [1997/1998] I bought and was shocked to find it was TY!). Who knows what this means for their quality/reputation. I wonder which brand name will be kept, or both. (kind of sounds like maybe both but hard to tell, unless I skipped over something)
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Postby dolphinius_rex on Fri Jan 20, 2006 8:47 pm

It'll be interesting to see how this affects the market overall. Memorex has always been the force driving prices lower and lower, to the point of breaking companies. Imation isn't quite known for these habits, so I'm curious about whether maybe the market will stop being so messed up all the time.
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Postby LoneWolf on Mon Jan 23, 2006 12:17 pm

I've never been enthused with the quality of Imation media, dating back to their magnetic media (never bought a box of 3M/Imation 3.5" floppy disks that didn't have at least one bad right out of the box) but continuing through their CD-R media as well. So I don't buy them.

Not been a huge fan of Memorex either, but that's more from seeing the crappy rebranded hardware they plugged than the media. I always thought their media wasn't horrible, but a bit below average.

As others have said, won't change my purchasing habits because I don't buy either. Interesting market development, though.
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Postby dodecahedron on Mon Jan 23, 2006 12:46 pm

LoneWolf wrote:Not been a huge fan of Memorex either, but that's more from seeing the crappy rebranded hardware they plugged than the media. I always thought their media wasn't horrible, but a bit below average.

well, some of their CDRW drives were rebranded Lite-On drives, so those at least were good.
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Postby LoneWolf on Tue Jan 24, 2006 3:19 pm

dodecahedron wrote:
LoneWolf wrote:Not been a huge fan of Memorex either, but that's more from seeing the crappy rebranded hardware they plugged than the media. I always thought their media wasn't horrible, but a bit below average.

well, some of their CDRW drives were rebranded Lite-On drives, so those at least were good.
Problem is, everything I've seen rebranded as Memorex is parts that Memorex could get cheap. I've seen DVD players, VCR's, CD and DVD drives and writers, and I'm sure there's a few more. Lite-On drives aside (and while they do a good job in the CDR world, I've not had good luck with them for writing DVDs, and their manufacturing quality has been average for optical drives), everything was crap. They bought the cheapest crap they could find, paid to have their name stamped on it, and then sold it in a bright and colorful retail box. Admittedly at a low price, but low-priced crap is still crap. If I ran a company, I'd want to stand on the reputation of my products. I've seen few products sold Memorex that I would stand by.
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Postby Ian on Tue Jan 24, 2006 3:44 pm

Over the years, I've come to know some of the guys at Memorex. Most of them are enthusiasts much like us. As with any company, cost is an issue. However, they try to pick the best media and drives they can given their budget.

They also push companies like NEC, Lite-On and Pioneer to improve their firmware and add support for more media. Given, this is primarily for their own media, but we do see the benefit of it.

Personally, I have not been a big fan of their Lite-On based drives. For what they charge, I'd rather get an NEC or something. Speaking of which.. I just got their NEC ND-3550A based drive today. Expect to see it in stores soon.
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Postby dolphinius_rex on Tue Jan 24, 2006 4:30 pm

Ian wrote:Over the years, I've come to know some of the guys at Memorex. Most of them are enthusiasts much like us. As with any company, cost is an issue. However, they try to pick the best media and drives they can given their budget.


Maybe the people WORKING for Memorex are like that.... but the person who OWNED Memorex was not. Memorex is a company that I can't see as anything but a bottom feeder, interested in getting the lowest quality/cheapest price goods, they can get away with selling in various markets. Their strategy has damaged the overall quality of recordable media world wide, to the point that all major brands are forced to offer crappy products just to compete.

I can only hope Imation makes then clean up their act!!
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Postby Ian on Tue Jan 24, 2006 4:58 pm

Actually, I believe the major stock holder was some Chinese company.

Edit: Yes.. it's Hanny Holdings of Hong Kong
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Postby dolphinius_rex on Tue Jan 24, 2006 5:05 pm

Ian wrote:Actually, I believe the major stock holder was some Chinese company.


I'm very well aware of that... the same company that owns Dysan. The owner is .... a "questionable" charactor.
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Postby Ian on Mon May 01, 2006 2:47 pm

"Blu-ray is just a bag of hurt." - Steve Jobs
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Postby dolphinius_rex on Mon May 01, 2006 7:09 pm

Ian wrote:The acquisition is now complete...

http://ir.imation.com/phoenix.zhtml?c=7 ... highlight=


And so is their journey towards the dark side.... :P
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