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HP to Acquire the Rest of Indigo, Deal Valued at Near $1 Billion

Press release from the issuing company

Hewlett-Packard Company (NYSE:HWP) and Indigo N.V. (NASDAQ: INDG) today announced that the companies have entered into an agreement for HP to acquire the remaining outstanding shares of Indigo, a leading commercial and industrial printing systems company. The acquisition of Indigo, which offers the broadest range of digital color printing presses in the industry, positions HP for a major thrust into commercial printing, a $400 billion market ripe for digital transformation. The companies will discuss the new relationship at the Print 01 trade show, which opened here today. HP currently owns 14.8 million of Indigo's common shares, representing 13.4 percent of the company's outstanding shares. Under the terms of the agreement, HP will acquire the remaining shares of Indigo for approximately $629 million in HP common stock and a potential future cash payment of up to $253 million contingent upon Indigo's achievement of long-term revenue goals, for an aggregate potential payment of up to $882 million. The transaction is expected to be accretive to earnings per share in its first full year of operation. "The Indigo team has a rich history of innovation and strong customer relationships that has made it a leader in the commercial printing market," said Carly Fiorina, chairman and chief executive officer, HP. "Our two companies have a proven track record of collaboration, and this new relationship will result in an even more compelling suite of offerings and support services for customers around the world." Indigo extends HP's printing systems portfolio beyond inkjet and LaserJet technology into a third high-speed color print technology and accelerates the company's plans to transform and lead the rapidly evolving commercial printing market. With the addition of Indigo, HP will sell offset-quality digital press solutions and services that will enable businesses to more effectively target and retain their customers with short-run, personalized business communications linked to digital document creation. "HP intends to lead the transformation of commercial printing into a web-enabled, all-digital industry," said Vyomesh Joshi, president of HP's Imaging and Printing Systems. "The speed, image quality and cost effectiveness of Indigo's technology will now be available to a larger audience through HP's brand strength and global reach. By linking Indigo's digital press to higher-value pages, we believe we can grow our commercial printing division over time into a multi-billion dollar HP business. We have worked closely with Indigo's management for several years and expect a smooth transition as they join the HP team." "Our vision has always been to lead the printing industry into the digital era and to see Indigo technology pervade the commercial printing market," said Benny Landa, Indigo founder, chairman and CEO. "Now, as part of HP, that goal is in sight." Indigo's versatile liquid electro-photography (LEP) technology spans commercial printing, industrial printing and photo-finishing. LEP combines digital laser imaging with ultra-small ink particles enabling prints of superb quality to be produced at offset printing speeds. Indigo is a $200 million business with a growing installed base, strong intellectual property in LEP, a highly profitable consumables business, a direct and specialized sales force, and experienced engineers. The company has 1,100 employees, is headquartered in The Netherlands, and has R&D and manufacturing operations in Israel. Upon completion of the transaction, Indigo will operate as a new division within HP's Imaging and Printing Systems business. Terms of the Transaction Under the terms of the agreement, HP will offer to acquire all of the outstanding equity of Indigo not already owned by HP in exchange for a combination of shares of HP stock and non-transferable contingent value rights (CVRs) entitling the holder to a contingent cash payment based on Indigo's achievement of revenue milestones. In exchange for each share of Indigo stock, shareholders of Indigo will receive either $7.50 in HP common stock, or $6 in HP common stock plus one CVR entitling its holder to a cash payment of up to $4.50 per share if Indigo achieves a total of $1.6 billion in revenue over a three-year post-closing period. The value of each CVR increases linearly from $0 to $4.50 as cumulative revenues increase from $1.0 billion to $1.6 billion. The HP common stock to be issued in each case will be determined based on the average closing price during the 20 trading days ending three trading days prior to expiration of the offer, with the average trading price to be used in such calculation not to be less than $16.69 or more than $23.68. The agreement calls for HP to issue equal quantities of each consideration alternative. The exchange represents a deal valued at approximately $629 million in HP common stock (based on the closing price of HP shares on September 5, 2001) as well as a maximum contingent cash payment of approximately $253 million. The acquisition is subject to a 95 percent minimum exchange condition, customary closing conditions and normal regulatory reviews.