News

January 20, 2006

Imation Buys Memorex: $330M

Filed under: Uncategorized — enews @ 3:09 pm

Imation Buys Memorex: $330M

Storage company to pay cash for privately held competitor.
January 19, 2006

Hoping to build its retail presence and product line, Imation said Thursday it would buy rival storage maker Memorex for $330 million in cash.

Imation, which sells flash drives, removable hard drives, and tape drives, as well as recordable optical discs, also reported its financial results for the fourth quarter, beating Wall Street’s expectations.

It said its net income rose to $18.4 million, or $0.52 per share, from $16.8 million, $0.48, in the third quarter. (Results in the year-ago quarter were distorted by the company’s restructuring.) Revenue rose to $343 million from $316 million.

Excluding one-time adjustments, the company said its per-share profit rose to $0.50 from $0.41 in the fourth quarter of 2004. A consensus of two analysts surveyed by Thomson Financial was that the company would earned $0.48 per share. The earnings news was released after the market closed, but Imation shares rose $1.50 to $47.10 in recent after-hours trading.

Oakdale, Minnesota-based Imation expects the Memorex addition to contribute an estimated $32 to $36 million in annual operating income, and approximately $0.40 to $0.47 per share. It expects to fully integrate Memorex by the end of the year.

“What this brings them is more scale in a business where scale matters, and arguably Memorex is a pretty good brand name,? said Daniel Renouard, an analyst with Robert W. Baird.

Privately-held Memorex, based in Cerritos, just south of Los Angeles, was founded in 1961 as a manufacturer of recordable magnetic tape for data storage. The company’s current products include recordable media, CD and DVD drives, and portable drives. The company reported operating income of $14 million on revenue of $205 million in the two quarters ended September 30.

Citing approval by the boards of both companies, Imation said it is fully able to fund the transaction with $508 million in cash on hand at the end of 2005.

Awaiting Sign-off
The transaction is subject to approval by the shareholders of Hanny Holdings, a Hong Kong-based company, and Investor Asia, a private equity firm. Together, the two groups hold 67 percent of Memorex shares.

Expected benefits from the union of the two companies including expense and purchasing reductions, as well as supply chain consolidation.

Memorex will remain a brand after the sale, said Deborah Hernandez, marketing communications manager at Memorex. Imation decided to purchase the company, “in large part because it’s such a strong brand on the retail shelf,? Ms. Hernandez said.

“Imation, with their technology, product development, and intellectual products [will] allow us to take our product lines even further,? she said.

http://www.redherring.com/Article.aspx?a=1…orex%3a+%24330M

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