Adobe Systems Incorporated (Nasdaq: ADBE) has announced a definitive agreement to acquire Macromedia (Nasdaq: MACR) in an all-stock transaction valued at approximately $3.4 billion. Under the terms of the agreement, which has been approved by both boards of directors, Macromedia stockholders will receive, at a fixed exchange ratio, 0.69 shares of Adobe common stock for every share of Macromedia common stock in a tax-free exchange. Based on Adobe’s and Macromedia’s closing prices on Friday April 15, 2005, this represents a price of $41.86 per share of Macromedia common stock.

A statement in the press release for Adobe reads:

The combination of Adobe and Macromedia strengthens our mission of helping people and organizations communicate better. Through the combination of our powerful development, authoring and collaboration tools – and the complementary functionality of PDF and Flash – we have the opportunity to drive an industry-defining technology platform that delivers compelling, rich content and applications across a wide range of devices and operating systems.

By combining the passion and creativity of two leading-edge companies, we will continue driving innovations that are changing the ways people everywhere are experiencing and interacting with information.

John Kennedy reports for SiliconRepublic.com, “Bola Rotibi, a senior analyst with Ovum commented: ‘This acquisition is major news for the software industry, although not altogether surprising. Macromedia has regularly been seen as a prime candidate for acquisition. The deal itself is not without issues from a competition standpoint since the resulting business will almost certainly hold a sizeable chunk of the GUI market that would make it difficult for some smaller vendors to play in. The companies have overlapping product sets and a product portfolio that goes in many different directions. That is both a positive and a negative and will need to be addressed, going forward,’ Rotibi said.”

Kennedy reports, “Rotibi also warned that the transaction could result in anti-competition court cases arising from competitors’ inability to compete against what in effect will be a software juggernaut. ‘Adobe’s revenues are around $2bn and Macromedia’s are around $350m to $400m – the revenue potential of their combined market play and future potential is substantial. The compelling offering of a cross platform play that serves Microsoft’s own environment will make it a formidable competitor for the Redmond giant but we think it would have had trouble making its own bid for Macromedia on anti-trust grounds. Ultimately both Adobe and Macromedia both have superb cross platform technologies and if they can exploit the ubiquity of the PDF reader and Flash, and really emphasise the ‘any client anywhere’ theme they will be a in a formidable position to dictate industry directions for the future,’ Rotibi concluded.”

Full article here.

MacDailyNews Take: If approved, this deal would remove another strong competitor in the software space and leave an even smaller handful of major players. If fact, in the consumer software market, excluding games, only Adobe, Apple, and Microsoft immediately spring to mind as large companies that make a wide variety of software applications. Still, hurray at least for it’s tabbed palettes for everyone! So, what happens to Dreamweaver? Are we all going to be using GoLive soon?