The combination of the complementary strengths of Peabody, Mass.-based ScanSoft, which as of Friday has a market capitalization of $142.6 million, and Caere, with a $89.9 million market cap, creates a digital imaging company with considerable reach.
"As we integrate the two companies, I am confident that we will become a far more efficient and effective competitor than either company could be on its own," Michael Tivnan, ScanSoft's chief executive, said in a statement.
The merger will also help ScanSoft expand its presence in Europe where Los Gatos, Calif.-based Caere has a strong foothold.
Under the terms of the definitive merger agreement, which was unanimously approved by the boards of both companies, the Caere common stockholders will receive $4 in cash and $7.75 in ScanSoft common stock.
The number of ScanSoft shares received by each Caere shareholder will be determined based on the 10-day average closing price before the deal was signed. The transaction is expected to be completed by the end of April, and is subject to the approval of the stockholders of each company.
The digital imaging market has been expanding rapidly, driven by the growing popularity of the image-rich Web pages and by the relatively inexpensive availability of scanners, digital cameras and other imaging peripherals.
According to research firm International Data Corp., worldwide shipments of scanners will grow from 18.9 million in 1999 to 39.4 million in 2003. InfoTrends Research Group projects that digital camera shipments will grow at a compound annual rate of 47 percent through the same period, with shipments increasing from 4.9 million to 23 million units.
"The combined company will also benefit from significant cost synergies," added Tivnan. "Upon full integration, we expect to record at least $10 million in annual cost savings, primarily through the elimination of redundant functions and the use of economies of scale for product distribution."
ScanSoft products include Kai's PhotoSoap2, TextBridge Pro, Pagis Pro Scanning Suite and PaperPort Deluxe. Caere's software product line includes OmniPage Pro, OmniForm, and PageKeeper Pro.
The combined company will retain the ScanSoft name and headquarters, and plans to continue to sell the full ScanSoft and Caere product lines.
The companies said that by the second half of 2000, they expect the merged company to be producing revenue at an annualized rate of approximately $100 million.
The acquisition will be accounted for under purchase accounting. Excluding one-time charges and acquisition-related costs, the transaction is expected to be immediately accretive to earnings per share.