HP acquires Mercury in US$4b cash tender deal
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Silicon Valley pioneer Hewlett-Packard has agreed to buy technology management software and services firm Mercury Interactive Corp in a cash tender offer worth US$4.5 billion, or US$52 per share.
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South China Morning Post
Silicon Valley pioneer Hewlett-Packard has agreed to buy technology management software and services firm Mercury Interactive Corp in a cash tender offer worth US$4.5 billion, or US$52 per share.

Once completed, the deal will add to HP's portfolio of information technology management software and services. It is the company's biggest acquisition since it purchased Compaq Computer in 2002 for US$19 billion.

Mark Hurd, HP's chief executive and president, said the merger with Mercury represented 'the most powerful management software portfolio in the industry'.

'Together, they will help customers cut their IT costs, speed the delivery of new services and drive profitable growth at HP. We expect this important acquisition to deliver significant value for our shareholders,' Mr Hurd said.

The Mercury acquisition is expected to increase the size of HP's software business to an enterprise with more than US$2 billion in annual revenue.

HP forecast its expanded software business would deliver revenue growth between 10 per cent and 15 per cent and an operating margin of about 20 per cent in 2008.

The acquisition will be conducted through a tender offer for all of Mercury's shares outstanding, followed by a merger of Mercury with an HP subsidiary. The tender offer is subject to several conditions, including Mercury having filed its annual report on Form 10-K for last year.

HP, which posted revenue totalling US$88.9 billion in the 12 months to April 30, expects the merger with Mercury to close next quarter.

Tony Zingale, Mercury's chief executive and president, said the combined company would become 'the industry's premier provider of business technology optimisation software'.

'A deal of this magnitude creates significant opportunities for our customers, our shareholders, our people and our partners,' Mr Zingale said.

The deal will bring together HP's OpenView systems, network and IT service management software and Mercury's strength in application management, application delivery, IT governance and service-oriented architecture governance.

That combination 'will integrate the many building blocks of enterprise IT management into one complete solution for the entire IT life cycle, from planning through to deployment and operations', said Thomas Hogan, senior vice-president for HP's software business.

Before HP's announcement, research firm Gartner had reported on Mercury's need for capital to invest in strengthening its product line against the competition.

'The lack of filing, its delisting [from Nasdaq last year] and the general lack of closure are significant impairments for Mercury's ability to grow in the short term,' Gartner said.

Mercury nevertheless tried to go it alone last month, when it acquired two companies - IT service desk specialist Vertical Solutions and Israeli software firm Telensoft - for an aggregate value of US$18.5 million.