Adobe stock slips on report saying DOJ plans suit to block Figma deal

Adobe shares fell as much as 5% in extended trading following a report that said the U.S. Justice Department is planning a lawsuit to block the company’s $20 billion acquisition of startup Figma.

A case could come as soon as next month, Bloomberg reported, citing an unnamed source.

The deal, announced in September, would help Adobe bring fast growth to its portfolio and pick up technology that could enhance existing programs in the Creative Cloud bundle that businesses and independent designers use. Adobe has said Figma would generate over $400 million in annualized recurring revenue in 2022.

But in buying Figma, which companies use to design apps and websites and collaborate on ideas, Adobe would also be taking a rising competitor off the market. Adobe, which has offered the XD software-design tool that has failed to generate substantial revenue, plays a major role in the design software market.

Competition authorities in the U.S. have become more willing to take on large companies’ efforts to expand. In December the U.S. Federal Trade Commission filed a lawsuit attempting to stop Microsoft from acquiring video game publisher Activision Blizzard.

“The combination of Adobe and Figma will deliver significant value to consumers, advance new product categories and technologies and create new market opportunities, and we’ve been delighted to hear from customers across the design space who tell us they are excited about the benefits the transaction will unlock,” an Adobe spokesperson told CNBC in an email.

“Adobe and Figma focus on very different product areas today. Figma is a leader in interactive product design, focused on building a collaborative web platform. Adobe is a leader in the creative tools space, helping millions of users create amazing visual content. Together, our vision will help enable millions of consumers to transform their productivity with creativity. We are engaged in constructive and cooperative discussions with regulators in the US, UK and EU, among others.”

David Wadhwani, president of Adobe’s digital media business and a key figure in the Figma deal, told analysts on a conference call in December that “the regulatory process is proceeding as expected.” Adobe was busy with the Justice Department’s second request process as the federal agency examined the deal, he said.

Adobe still expects to close the deal in 2023, the spokesperson said.

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