ADOBE, the software maker best known for its Acrobat program, is expected to face the scrutiny of US competition authorities, after agreeing a $3.4 billion (£1.8 billion) merger with Macromedia, a rival.

Analysts said that the all-share deal with Macromedia, the maker of Flash and Dreamweaver products, could excite the interest of regulators because the combined group would have a “sizeable chunk” of the market for software used in developing websites.

Shares in Adobe fell 10 per cent to $54.77 in New York yesterday on concerns over the potential risks involved in such a large deal. Shares in Macromedia were up 10 per cent at $36.72.

Bola Rotibi, senior analyst at Ovum, the technology research group, said: “The deal itself is not without issues from a competition standpoint.” She said the takeover would make it difficult for smaller operators to compete in the market for software used by web developers.

The merger will bring together Macromedia’s web development tools and Adobe’s professional graphics software, such as its Adobe Photoshop product. Adobe also pioneered the use of PDF files to distribute documents electronically, allowing users to view but not alter text or graphics documents.

The deal values Macromedia shares at just under $42, giving the group’s shareholders an 18 per cent stake in the enlarged group and illustrating the sharp rise in its fortunes since its flotation 13 years ago.

Founded through a three-way merger in 1992, the company was valued at $121 million when it floated two years later on the Nasdaq exchange.

Bruce Chizen, chief executive of Adobe, said that the enlarged company — of which he would remain chief executive — would look to take advantage of the “explosion in digital information”. He said: “This is a strategic acquisition (but) there are some opportunities where there are going to be some cost synergies.”

Adobe’s Acrobat product, which is used to create PDF files, is seen as complementary to Macromedia’s Flash product, which allows users to view animations online.

The two companies hope that the combination of their product portfolios will bolster their ability to compete in existing markets and in new markets for digital content, such as that delivered through mobile phones.

But some analysts remain sceptical that Macromedia needed to do a deal, given the company’s continued strong financial performance.

Neil Ward-Dutton, a partner at Macehiter Ward-Dutton, the IT advisory group, raised questions over the benefits for the group. “Joining with Adobe obviously enables Macromedia to have a bigger footprint, but I don’t see what the merger gives it that it wouldn't have had anyway.”