Hewlett-Packard to buy Mercury Interactive for $4.5 billion
Hewlett-Packard Co (HP) agreed on July 25 to buy Mercury Interactive Corp for about $4.5 billion in stock, or $52 per share, in a bid to expand the computer maker's business software operations.
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Hewlett-Packard Co (HP) agreed on July 25 to buy Mercury Interactive Corp for about $4.5 billion in stock, or $52 per share, in a bid to expand the computer maker's business software operations.

The deal, which sent shares of the No 2 personal computer maker down 4 percent, should help boost sales of HP's OpenView systems management software, which makes it easier for far-flung businesses to monitor the hardware, software and networks running throughout their organisations.

The purchase of the former star Israeli technology company also puts HP in closer competition with other major systems management software providers, including IBM's Tivoli unit, CA Inc's UniCenter and BMC Software.

Since last year, a number of top Mercury executive have left amid a regulatory probe into its stock option granting practices. The financial scandal drove Mercury, once a top performing stock, to delist from the Nasdaq market.

HP is paying a premium of about a third for Mercury shares in the $4.5 billion deal, which is net of Mercury's existing cash and debt, and ranks as one of the largest prices ever paid to acquire a company with Israeli roots.

It ranks alongside Lucent's $4.5 billion 2000 deal to buy network gear maker Chromatis and Warren Buffet's recent purchase of Iscar, a maker of metal-working equipment, in a deal that values Iscar at about $5 billion, according to Dealogic.

It also marks the first major deal for Mark Hurd since he took over as chief executive more than a year ago, though he said it did not signal a change of strategy for the company. HP has long aimed to become a diversified supplier of not just computers and printers, but also software and services for businesses.

Mercury is among about 80 companies under investigation by federal prosecutors and securities regulators over stock option grants. In November, Mercury replaced its chief executive and named a new chief financial officers over the issue.

The deal will nearly double HP's software business to more than $2 billion in annual revenue and deliver growth rates of 10 percent to 15 percent by 2008, the company said. It is expected to close in the fourth quarter of calendar year 2006.

Copyright Reuters, 2006