Computer Associates (CA) announced on Monday that it will acquire e-business software company Sterling Software in a stock swap valued at $4bn (£2.5bn). The purchase will bolster CA's e-business software products.
Under terms of the agreement, CA will exchange 0.5634 shares of its stock for each outstanding Sterling share. The companies also put in a collar on the deal, so if the average trading price of CA is greater than $77.12 (£47), the exchange ratio will be reduced so that each Sterling share tendered in the offer would be exchanged for $43.45 (£27) worth of CA stock. If the average trading price of CA shares for the period is less than $63.10 (£39), then the exchange ratio will be increased so that each Sterling share tendered in the offer would be exchanged for $35.55 (£22) worth of CA stock. CA said it can reduce the exchange ratio and make up the difference in cash and/or stock.
Both companies said they would combine Sterling products with CA's Jasmine platform. They also highlighted their breadth of storage technology, which will include distributed backup and recovery products as well as storage area network software.
"CA's business, built on a combination of world-class technology and high value-added consulting services, will immediately benefit from complementary technology and services from Sterling Software," said Sanjay Kumar, CA's president. "The combined company will be able to exploit the incredible opportunities of the Internet era."
Sterling Software has 3,800 employees, while CA has 18,000. There has been no mention of job cuts, cost savings or whether Sterling chief executive Sterling L Williams would remain after the merger. Sterling Software also reported strong first quarter earnings last week.
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