Your browser is out-of-date!

Update your browser to view this website correctly. Update my browser now


Imation To Acquire Memorex

Oakdale, Minn. — Imation and Memorex International have entered into a definitive agreement that has Imation acquiring Memorex for $330 million in cash.

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 the financial performance of the purchased business. The boards of both companies have approved the transaction, with the sale expected to close by the middle of the second quarter of 2006.

“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/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.”

Golacinski, Memorex president/CEO, will head up Imation’s consumer business, maintaining the Memorex headquarters in Cerritos, Calif.

A consumer electronics industry veteran, Golacinski, who was an executive with Maxell prior to joining Memorex in 1997, said, “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 last March 31, the company reported revenue of $430 million and operating income of $30 million. In the subsequent two quarters, ending last September 30, Memorex’s revenue totaled $205 million and operating income totaled $14 million.

Memorex traces its history back to 1961 when it was founded as a company making recordable magnetic tape for data storage. Memorex launched the audio cassette in 1971 and created one of the most memorable brand images with singer Ella Fitzgerald’s voice breaking a glass with the tag line — “Is it live or is it Memorex?”

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 market. Its current portfolio includes recordable CDs and DVDs, which constituted about two thirds of 2005 revenue. Other products include branded accessories, which account for about 15 percent of revenue; USB flash drives, 10 percent; and magnetic and optical drives, 5 percent.

After completion of integration, Imation expects Memorex to be significantly accretive, adding approximately $32 million to $36 million in annualized operating income. 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.

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,

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.