Palm to buy Handspring in $169m deal


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Jason Ho

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Jan 17, 2002
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SAN FRANCISCO (CBS.MW) - In a bid to emerge a stronger competitor in the cut-throat handheld business, Palm on Wednesday said it's buying rival Handspring in a stock deal valued at about $168.9 million.

On the news, shares of Palm (PALM: news, chart, profile) rose 7 percent to $13.02 while Handspring gained 14 percent to as high as $1.29.

"Palm and Handspring share a vision that handheld computers and smartphones have the potential to redefine the landscape of personal computing," said Donna Dubinsky, chief executive officer of Handspring. Dubinsky was a co-founder of Palm in 1992. She left in '98 to create Handspring.

Under the terms of the Handspring (HAND: news, chart, profile) acquisition, which will follow the PalmSource spin-off, which was approved by Palm's board of directors, Palm will issue 13.9 million shares of stock, and exchange 0.09 Palm shares for each Handspring share outstanding.

Based on Tuesday's closing price of $12.15 for Palm shares, the deal values Handspring stock at $1.09 each, a discount to Tuesday's closing price of $1.11.

Handspring shares are trading above Palm's offer price, indicating that Handspring shareholders are betting that Palm might raise its offer.

At $1.09, Handspring would also be sold at about 7 percent of its $20 IPO price it was given when it went public in June 2000. Its market cap at the time was $2.5 billion, according to Dealogic. In March 2000, Palm went public at $38, which gave it a market cap of $21.3 billion at the time.

With the acquisition, Palm expects to save $25 million annually, which will include elimination of 125 jobs. The name of the merged company will be renamed later in the year.
 

caseytan

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No, the co-founder of Palm left Palm to set up HandSpring
 

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