As has been rumored for several months, Kodak’s Graphic Communications Group announced yesterday that it has entered into a definitive agreement to acquire Creo Inc., a premier supplier of prepress systems used by commercial printers worldwide. Under the terms of the agreement, Kodak will pay approximately $980 million in cash, or $16.50 per share, for all the outstanding shares of Creo, on a fully diluted basis. Creo presently has approximately $85 million in cash on its balance sheet and no debt. The transaction, which has been approved by Kodak's and Creo's respective boards of directors, is to be carried out by statutory plan of arrangement under Canadian law and is subject to regulatory approvals, the approval of Creo's shareholders, and court approval. Kodak expects the transaction to close during the second quarter. Creo shares were up nearly 14% on the news, trading at $16.32 Monday morning. Creo’s share price, over the past 52 weeks, has ranged from a low of $6.53 on May 6, 2004, to today’s high.

Upon Kodak’s announcement that it would be acquiring Sun Chemical’s 50% interest in the Kodak Polychrome Graphics joint venture, there were indications that another acquisition was in the works. According to Kodak’s Chairman and CEO, Daniel A. Carp, “Graphic Communications represents one of the three pillars of Kodak's digitally oriented growth strategy. The purchase of Creo strengthens that pillar, and essentially concludes the company's acquisition plan, announced in September 2003."

As our readers will be aware, Creo has been embroiled in a bitter proxy fight for control of the company. The dissidents, Goodwood Inc. and Burton Capital Management, who between them own nearly 6% of Creo’s shares, were forcing a shareholder vote on February 10, to replace the Creo Board with their own nominees and install Robert G. Burton, Sr., as Chairman and CEO. Their plan was to restructure the company in what Creo referred to as a “contradictory and ill-conceived strategy for Creo.” Both parties have been lobbying shareholders heavily over the last few weeks.