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Palm To Acquire Handspring For $168.9 Million in Stock
Wednesday June 4, 8:47 am ET
Palm Inc. said Wednesday that it agreed to acquire Handspring Inc. (NasdaqNM:HAND - News) for about $168.9 million in stock, creating a stronger provider of hand- held computing and communication products.
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Palm's board also gave final approval for the much-anticipated spinoff of PalmSource Inc. Palm has been planning the separation of the software division since last summer, and has said it expects to spin off the division by the end of this summer.
Palm, based in Milpitas, Calif., said shareholders of Handspring, Mountain View, Calif., will receive 0.09 of a Palm share for each share of Handspring common stock owned. Based on Palm's closing price of $12.15 Tuesday, the deal values each Handspring share at about $1.09, representing a discount of 1.8% from the Tuesday closing price of $1.11.
Palm said it will issue about 13.9 million shares of Palm common stock to Handspring's shareholders.
Handspring's shareholders will own about 32.2% of the newly merged company on a fully diluted basis, and Palm's shareholders will own about 67.8%.
The deal, encompassing the spinoff of PalmSource and the merger of Handspring with the remaining Palm Solutions Group of Palm, is expected to close in the fall.
The boards of both companies approved the agreement, which also has the support of Handspring's three largest employee stockholders -- Jeff Hawkins, Donna Dubinksy and Ed Colligan. Messrs. Hawkins and Colligan and Ms. Dubinsky control about 37.5% of Handspring's outstanding shares.
Palm and Handspring share a bit of history. Mr. Hawkins co-founded Palm in 1992 with Ms. Dubinksy, Handsprings' CEO. In 1998, Messrs. Hawkins and Colligan and Ms. Dubinksy left Palm to create Handspring.
The combined company will be structured around two business units: handheld computing products and smartphones.
It will be led by Palm Solutions Group President and Chief Executive Todd Bradley, who will remain in those positions. Mr. Hawkins, Handspring's chairman and chief product officer, will become chief technology officer.
Ken Wirt, currently Palm Solutions' senior vice president of sales and marketing will lead the handheld computing group, while Mr. Colligan, current president and chief operating officer for Handspring, will head the smartphones business. Ms. Dubinsky will serve on the board.
Palm said it expects "greater revenue opportunities" from the combination, and anticipates improved operating efficiencies to result in about $25 million in cost savings annually. The company anticipates the elimination of about 125 jobs and overlapping programs.
Palm said it will provide an initial $10 million line of credit to Handspring for working capital until the deal closes. The line of credit may increase to $ 20 million, under certain conditions, the company said.
-Yolanda E. McBride, Dow Jones Newswires; 609-520-7861
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