The deal values Vancouver-based Creo at $16.50 US a share.
The announcement boosted Creo stock and led dissidents, who had been trying to replace the board, to drop their campaign.
"We are delighted that a world-class company such as Kodak has recognized the value we believe is inherent in Creo's business," said Robert Burton of Burton Capital Management, one of the dissidents.
Creo shares were up more than 12 per cent after the deal was announced. On the TSX, the stock was up $2.18 at $20.07, while it added $1.81 US at $16.17 US on Nasdaq.
Eastman Kodak shares were up 39 cents US at $33.09 US on the NYSE.
"Today we conclude a strategic review process that began last summer," said Amos Michelson, Creo's chief executive officer.
"The economy of scale gained by combining resources will allow us to speed up product development and deliver new innovations and breakthrough solutions to the market," Michelson said.
Creo provides software used by printers to manage the movement of text, graphics and images from the computer screen to the printing press.
Kodak said the acquisition will modestly dilute its earnings for the remainder of 2005, but reaffirmed its operational earnings guidance range of $2.60 US to $2.90 US per share for the year.
For 2006, Kodak expects that Creo will add at least 5 cents US a share to its operating earnings, through cost savings and revenue growth. Kodak also expects approximately $700 million US of incremental revenue from Creo in 2006, which had 2004 fiscal year sales of totalled $636 million US.
The boards of Creo and Rochester, N.Y.-based Kodak have approved the takeover, which will be voted on by Creo shareholders on March 29. Creo's annual and special shareholders meeting originally set for Feb. 10 has been postponed.
Creo had been the target of a shareholder revolt, with dissident owners pushing for the ouster of the current board of directors and management, and the installation of Burton as chairman and CEO. Burton led a turnaround at Moore Corp.
- FROM Jan. 10, 2005: Creo urges rejection of proposed dissident board
Kodak said it ended 2004 with about $1.26 billion US in cash on its balance sheet, and added that it plans to finance the Creo takeover by issuing debt.
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