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Indigo (Nasdaq:INDG, INDGW) should count its blessings. It could have fared worse than to be completely taken over and delisted by Hewlett Packard (NYSE:HWP) for up to $882 million.

Once upon a time, Indigo seemed to have all the ingredients for major success. It had promising print technology, a strong management that drove the company from one public offering to another, and in the case of its chief executive Benny Landa ? a chairman with vision.

The company first went public in May 1994. Registered in the Netherlands, it was positioned as a dream of Israeli hi-tech. But in actuality, investors also ate plenty of bitter herbs.

A year after its IPO, Indigo found its expenses spiraling and its market disappointing. Meanwhile technical problems started to crop up in its printers, which hurt sales and deepened its losses even more.

The company began its career at a market cap of about a billion dollars, peaked at almost $3 billion, and is only now crawling back up towards that billion-dollar level. But since 1994, its aggregate net loss comes to $200 million. And that's not counting written off inventories of printers returned by dissatisfied customers.

Master of capital-raising
The one area in which Indigo truly excelled, in retrospect, was in raising public money. Including the $100 million HP invested in the company in September 2000, and its private placements, Indigo roped in no less than $600 million. A sum of that size puts the whole acquisition deal by HP in a new light.

Officially, in total, HP is buying all the Indigo outstanding equity it does not already own, 86.6%, for $629 million in stock, from the company's private and institutional shareholders. HP had, as said, already invested $100 million in Indigo for 13.4% of its equity, reducing the effective price of the deal to $529 million.

Now: That price tag of $629 million is pretty close to the $600 million Indigo has brought in from investors over the years. Ostensibly, the company does not seem to have created much value.

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But if milestones are factored in, the minimal value of the deal works out to $726 million, based on the deal structure - a combination of HP stock and non-transferable contingent value rights (CVRs) that entitle the holder to a contingent cash payment based on Indigo's achievement of revenue milestones.

A price of $726 million is 4% above Indigo's opening cap on Friday. Not bad considering how sorry the state of the industry, and considering Indigo's own past performance.

Stock, or cash and stock
The agreement between the two companies regarding cash and CVRs gives shareholders two alternatives. For each Indigo share, the holder could choose to get $7.5 worth of HP stock, or a combination of $6 in stock plus one CVR certificate, granting payment of up to $4.5 per share.

Which is where things get complicated. The cash payment will only kick in if Indigo generates of $1.6 billion or more over three years from the date of the deal's closure. The value of each CVR will rise linearly from zero (in case of revenues exceeding $1 billion over three years) to a ceiling of $4.5 (in case of accrued revenues of $1.6 billion or more over three years).

The deal has a hedging mechanism. The HP common stock to be issued in each case will be determined according to its average closing price during the 20 trading days ending three trading days prior to expiration of the offer. The average trading price may not be less than $16.69 or exceed $23.68, the deal stipulates. The maximum cash payment could be about $253 million.

The main beneficiaries of the deal are first and foremost the Landa family, which holds 43% of Indigo's equity. They should wind up with $290 million to $420 million, or, the equivalent of 40% of Indigo's accrued revenue from 1994. Benny Landa, though, has invested about $100 million of his own money in the company.

George Soros also comes out smiling. With 23% of the company's shares, he stands to get between $167 million to $240 million. He has been known to call Indigo a disappointment and complained of being stuck with its stock. No more.

Company workers also come out well, as they stand to receive between $72 million to $105 million.

After achieving a price tag of four times its average annual sales, Indigo can't complain. But when launching the company, Benny Landa had envisioned it becoming a world leader in its field, not its ending up as another division under a multinational's wing. But realistically, he probably realized that his baby had hit the ceiling, and couldn't hack it alone against the mammoths in digital printing - Xeikon and Germany's Heidelberg.