Irvine CD-ROM Maker Unveils Plans for Merger : Multimedia: Graphix Zone's deal with StarPress Inc. of San Francisco is valued at $39 million. The new company will stay in Orange County.

By DAN MARGOLIS

Dec. 5, 1995 12 AM PT

SPECIAL TO THE TIMES

IRVINE —

Graphix Zone Inc., a multimedia company known for its aggressive pursuit of top show business talent, announced Monday that it intends to merge with a San Francisco-based CD-ROM producer through an exchange of stock valued at $39 million.

The merger will bring together Graphix Zone, a developer of music and other entertainment CD-ROMs, and StarPress, a leading developer of reference CD-ROMs.

StarPress Inc. will own 54% of the combined new company, but it will take Graphix Zone’s name and occupy Graphix Zone’s Irvine headquarters. StarPress Chairman Ron Posner will become chairman of the combined company, and Chuck Cortright will continue as Graphix Zone’s president and chief executive.

Executives for the Irvine company, which has recently signed deals with jazz legend Herbie Hancock and filmmaker Oliver Stone, say the merger will give it the diversity it needs to step up to the big leagues of the multimedia world. In the past year, Graphix Zone has sold more than 80,000 copies of its interactive discs featuring rock singers Bob Dylan and the artist formerly known as Prince.

Graphix Zone specializes in music CD-ROM packages, sold in computer and music stores, while StarPress markets most of its educational and game interactive discs in large retail outlets, such as Kmart and Wal-Mart. The companies expect to have 100 titles to offer by the end of 1996.

Cortright said the most attractive aspect of the merger is StarPress’ lineup of 60 interactive discs, including “Complete Guide to Symptoms, Illness and Surgery” and Wheel of Fortune. He said the larger product line will make Graphix Zone much more marketable to distributors. The Irvine company offers only six CD-ROM titles.

“You can have all the greatest products in the world, but if you can’t get them to the customer, you have nothing,” Cortright said.

Analysts applauded the deal. Graphix Zone and StarPress “are too small to compete on their own,” said Deborah Wardwell, an analyst with Cruttenden Roth, an Irvine brokerage.

“The merger creates a more compelling company, with more predictable earnings,” she added.

Under terms of the deal, about 4.4 million shares of Graphix Zone common stock will be exchanged for StarPress stock. StarPress shareholders will receive about 0.15 shares of Graphix Zone common stock for each share of StarPress stock.

The companies said they expect to complete the merger in March after obtaining regulatory approvals and the approval of each company’s stockholders.

The transaction comes about six months after Great Bear Technology Inc. acquired the former StarPress Multimedia in a transaction valued at $20.4 million, part of a recent consolidation in the multimedia industry.

The companies said they plan to grow through their product lines and through acquisitions. The companies plan to cut overlapping staff, although the number has not been determined, sources said.

Graphix Zone shares fell $1.375, closing at $7.50 in heavy trading on the Nasdaq market. Nearly 162,000 shares changed hands, compared with a daily average of 35,800 shares in recent months.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Multimedia Merger

Graphix Zone Inc. will merge with San Francisco-based StarPress, with the combined companies retaining the Graphix Zone name. After the merger, StarPress operations will relocate to Irvine, and its chairman, Ron Posner, will become Graphix Zone chairman. Details on the two companies:

GRAPHIX ZONE INC.

Headquarters: Irvine

President/CEO: Chuck Cortright

Business: Entertainment CD-ROMs

Founded: 1989

Employees: 50

Fiscal 1995 revenue: $3.4 million

Fiscal 1995 net loss: $567,509

Exchange: Nasdaq

Titles: Bob Dylan’s “Highway 61 Interactive”; Oliver Stone’s “Nixon” and Herbie Hancock’s “The History of Jazz,” both in development

STARPRESS INC.

Headquarters: San Francisco