Palm On Course for Handspring Acquisition

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Palm Acquires Handspring When Palm Inc. announced in June it was going to acquire Handspring, many wondered whether it would be allowed to do so by the FTC. This week the deal passed an important milestone that indicates there won’t be a challenge from the U.S. government.

The Federal Trade Commission (FTC) is charged with enforcing U.S. antitrust laws. When the announcement came that two of the biggest names in handhelds would be merging into one company, some questioned if this would be an anti-competitive move. Obviously, the FTC believes it won’t be as it has declined to raise any protest. This is probably because, though Handspring was once the second largest handheld maker, over the last year or so it has focused its efforts almost entirely on the Treo line of smart phones.

The acquisition of Handspring will be part of an almost complete reorganization of the the company. Palm Inc. is currently made up of two divisions: PalmSource, a subsidiary responsible for developing and licensing the Palm operating system, and the Palm Solutions Group, a business unit responsible for designing, making and marketing Palm-branded handhelds.

PalmSource will be spun off as a separate company later this year. Handspring will merge with the remaining part of Palm. This company will take on a new name, though what this will be is not yet known. An announcement of the new name is expected in the near future.

Details of the Merger

Under the proposed terms of the transaction, and following the spin-off of PalmSource, Handspring’s shareholders will receive 0.09 Palm shares — and no shares of PalmSource — for each share of Handspring common stock owned. Palm Inc. will issue approximately 13.9 million shares of Palm common stock to Handspring’s shareholders on a fully diluted basis. As a result of the merger, Handspring’s shareholders will own approximately 32.2 percent of the newly merged company on a fully diluted basis, and Palm’s shareholders will own approximately 67.8 percent.

The value per share to be received by Handspring shareholders will be based on the Palm share price following the spin-off of PalmSource. The spinoff of PalmSource will be completed immediately prior to the closing of the Handspring acquisition.

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