Palm Acquires Handspring; Board Approves PalmSource Spin-off

Jun 06, 2003

The boards of directors of Palm, Inc. and Handspring, Inc., a maker of Palm OS smartphones, have each unanimously approved a definitive agreement for Palm to acquire Handspring. The Palm board also gave final approval for the spin-off of PalmSource, Inc. Palm, Inc. consists of two businesses--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 the handheld devices. Immediately following the completion of the spin-off, Handspring will be merged with Palm, and the merged company will be renamed later in the year. The transaction, encompassing the spin-off of PalmSource and the merger of Handspring with the remaining Palm Solutions Group of Palm, is expected to close in the fall, subject to certain conditions. The merger is designed to create a stronger competitor in handheld computing and communication solutions. The completion of the acquisition is conditioned upon, among other things, the expiration or termination of the waiting period under the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, foreign anti-trust regulatory filings, approval from shareholders of Palm, Inc. and Handspring, listing of PalmSource shares on the Nasdaq Stock Market and other customary closing conditions. Shareholder votes are expected to take place at the two companies' respective stockholder meetings to be held in the fall.

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% of the newly merged company on a fully diluted basis, and Palm's shareholders will own approximately 67.8%. 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 spin-off of PalmSource will be completed immediately prior to the closing of the Handspring acquisition.

The merged company will be led by Todd Bradley, who will continue as president and CEO, and will be structured around two business units: handheld computing solutions, led by Ken Wirt, currently senior VP, sales and marketing, for Palm Solutions; and smartphone solutions, to be led by Ed Colligan, current president and COO for Handspring. Jeff Hawkins, Handspring chairman and chief product officer, will become CTO for the merged company. Upon execution of the spin-off and closing of the merger, the Palm Solutions board of directors will consist of seven members from the current Palm, Inc. board plus three members of the current Handspring board of directors: John Doerr, Bruce Dunlevie and Dubinsky. David Nagel, PalmSource president and CEO, will leave the Palm, Inc. board. Benhamou will continue as chairman of the PalmSource board, and of the merged company board.

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