Imation buys Memorex in $330M deal

The companies expect to fully integrate their businesses by year's end

Data storage vendor Imation Corp. announced yesterday a $330 million cash deal to acquire 45-year-old Memorex International Inc., a well-known provider of consumer CD and DVD products for multimedia storage.

Imation, which was formed as a spin off from 3M Co. in 1996, will also pay between $5 million to $45 million over a period of three years after the close to Memorex owners, depending on how the new business performs after the acquisition, according to Imation.

Both Imation stockholders and Memorex, which is privately held, have approved the acquisition. The companies expect to integrate their businesses fully by the end of the year.

Michael Golacinski, president and CEO of Memorex, will lead Imation's consumer business, continuing operations at the Memorex headquarters in Cerritos, Calif.

Imation plans to retain the Memorex brand once the acquisition is complete, according to Imation spokeswoman Mary Rawlings-Taylor. Memorex has strong brand recognition among consumers for providing recordable CDs and DVDs, and previously was a major provider of cassette tapes when that storage format was popular.

In fact, the power of the Memorex brand is what made the deal especially attractive to Imation, Rawlings-Taylor said. Imation is known mainly for providing tapes and diskettes for storing computer data, but it also has a consumer storage business in CDs and DVDs. The company hopes the Memorex acquisition will boost its presence in that area, she said.

In Memorex's fiscal 2005, which ended March 31, 2005, the company reported revenue of $430 million and operating income of $30 million. In the subsequent two quarters that ended Sept. 30, 2005, Memorex's revenue was $205 million and operating income was $14 million.

After the companies are merged, Imation expects its Memorex unit to add $32 million to $36 million in yearly operating income and earn about 40 to 47 cents per share for the year.

Copyright © 2006 IDG Communications, Inc.

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