ScanSoft and SpeechWorks to Merge

PEABODY and BOSTON, MA - ScanSoft Inc. (NASDAQ: SSFT) and SpeechWorks International Inc. (NASDAQ: SPWX) announced a definitive agreement for ScanSoft to purchase all of the outstanding common stock of SpeechWorks. Under the terms of the agreement, ScanSoft will issue approximately 32.6 million shares of its common stock to SpeechWorks shareholders who will receive 0.860 shares of ScanSoft common stock for each share of SpeechWorks stock that they own. The transaction is valued at approximately $132 million, net of SpeechWorks' cash balance of $49 million as of December 31, 2002 and based on the closing price of ScanSoft common stock on April 23, 2003 of $5.56 per share. Based on the average closing price for the companies' shares during the last 30 days, the premium paid is approximately 63 percent. The transaction will be accounted for as a purchase. The combination of ScanSoft and SpeechWorks will result in a global organization with a broad portfolio of speech technologies, applications and services. The company will apply its patented technologies to produce next-generation speech interfaces and solutions and leverage its financial strength and operational discipline to provide customers and partners with a global supplier of standards-based speech applications. Upon completion, ScanSoft expects to have total assets of approximately $386 million, including approximately $60 million in cash. The transaction is expected to generate cost synergies of approximately $27 million through headcount reductions in major operating functions of each company, office site consolidations and reductions in marketing and administrative expenses. As a result of these synergies, most of which will be realized at closing, ScanSoft expects the transaction to be neutral to earnings, before amortization of acquisition-related intangibles, for the first full quarter; approximately five percent accretive to earnings for the first full year; and approximately 10 percent accretive to earnings for the full year 2004. In 2004, ScanSoft expects combined revenue to exceed $200 million, including more than $125 million in speech-related revenue, and earnings per share of approximately $0.42 to $0.43, before amortization of acquisition-related intangibles. "The combined organization gives ScanSoft the resources to lead the speech industry with a diverse and proven set of assets," said Paul Ricci, chairman and CEO of ScanSoft. "With this transaction, ScanSoft's innovative technologies and solutions, broad channels, professional services expertise, strong management and talented employees will allow us to accelerate the development and adoption of innovative speech-enabled applications and services worldwide." The transaction has been approved unanimously by both Boards of Directors and is subject to the approval of ScanSoft and SpeechWorks shareholders and various closing conditions including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The special meetings of shareholders are to be announced at a later date. Following regulatory and shareholder approval, ScanSoft expects the transaction to close by August 1, 2003. Evercore Partners served as financial advisor to ScanSoft in the transaction and Morgan Stanley served as financial advisor to SpeechWorks. Investment Protection and Future Solutions
In recognition of the global success of SpeechWorks' and ScanSoft's current automated speech recognition (ASR) and TTS product suites, both companies' products will continue to be available and supported. The company plans to integrate its offerings and provide seamless API interfaces, based on industry standards, to facilitate product and application updates. "SpeechWorks is committed to the proliferation of speech solutions on a global scale, and we believe this transaction brings value to the entire industry," said Stuart R. Patterson, CEO of SpeechWorks. "We look forward to combining our resources with ScanSoft. Our collective strengths and expertise, combined with our global network of partners, will allow us to provide enterprise and carrier customers around the world with even more powerful and efficient speech solutions that generate new revenues, reduce costs and enhance customer satisfaction." ScanSoft Executive Team
Paul Ricci will remain Chairman and Chief Executive Officer of ScanSoft. Upon the close of the transaction, Stuart Patterson will become President of ScanSoft. In addition, several key members of the SpeechWorks executive team will join the senior management ranks of ScanSoft. Paul Ricci added, "I am enthusiastic about Stu joining the ScanSoft team in this key executive role. With the tremendous opportunities that lie ahead for the combined organization, his 20 years of experience in telecommunications and leadership in the speech industry will be invaluable assets." In conjunction with this announcement, ScanSoft today also announced the retirement of Michael Tivnan from his positions as President, COO and Board Member. Mr. Tivnan will continue to serve as a senior advisor for the company. "Throughout his tenure, Mike has led the company through several transformations and made innumerable contributions to the growth and development of ScanSoft. I wish to express my sincere appreciation for his tireless efforts," added Mr. Ricci.
SpeechTek Covers
for qualified subscribers
Subscribe Now Current Issue Past Issues