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MARK of the BEAST WATCH:VeriChip Parent Buys Out Animal Chipping Subsidiary

The corporate structure and relationship among Applied Digital, Digital Angel, and VeriChip has historically been confusing, but a merger between Applied Digital and Digital Angel announced last week may change that.Until now, Applied Digital of Delray Beach, Florida, had majority ownership positions in VeriChip, also based in Delray Beach, and Digital Angel of St. Paul, Minnesota. Applied Digital was effectively a holding company, with revenues generated by the subsidiaries. VeriChip is the provider of its namesake human-implantable RFID chip; Digital Angel provides similar chipping technology but targeted at the livestock and pet markets. All three companies were publicly traded: Applied Digital (ADSX) and VeriChip (CHIP) on the Nasdaq, and Digital Angel (DOC) on the American Stock Exchange.Last week Applied Digital and Digital Angel announced that they would effectively merge, with Applied Digital buying up the outstanding 45 percent of Digital Angel stock that it does not already own. The all-stock deal is valued at about $31 million. Digital Angel will no longer be traded on the American Stock Exchange, and the combined entity will be traded on the Nasdaq. A new CEO will be sought, and in the interim Digital Angel board member Barry M. Edelstein will serve as CEO and president.The merger will result in a streamlined, more efficient company by eliminating overlapping overhead and processes. The company projects that over $2 million will be saved per year. "In a single transaction, we will create a financially stronger, more robust and better capitalized company, and substantially reduce overhead costs," commented Applied Digital CEO Michael Krawitz. The merger will also see facilitated technology transfer and renewed focus on core opportunities.Part of the rationale for the merger appears to be eliminating the confusion that investors faced when considering investment in Digital Angel. "We also eliminate Applied Digital's majority ownership overhang position in Digital Angel, which has created uncertainty among investors and customers," Krawitz was quoted. According to Edelstein, "This transaction simplifies the capital structure ... and should make Digital Angel more attractive for investors."
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