HP has announced its intention to purchased Mercury through a cash tender offer for $US52.00 per share, or an enterprise value of approximately $US4.5 billion, which is net of existing cash and debt.
Mark Hurd, HP chief executive officer and president says they are combining two market-leading businesses “to create the most powerful management software portfolio in the industry.
“Together, we 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.”
Mercury CEO and president Tony Zingale says the move means that Mercury instantly becomes the industry’s premier provider of business technology optimization (BTO) software.
“A deal of this magnitude creates significant opportunities for our customers, our shareholders, our people and our partners.”
The transaction brings together the strength of HP OpenView systems, network and IT service management software with Mercury’s strength in application management, application delivery, IT governance and service-oriented architecture governance.
Founded in 1989, Mercury conducts business worldwide and is one of the fastest growing enterprise software companies today. It provides software and services to govern the priorities, people, and processes of IT; deliver and manage applications; and integrate IT strategy and execution.
The Mercury acquisition is expected to increase the size of the HP Software business to more than $US2 billion in annual revenue. Immediately following the close of the transaction, Mercury will become part of the HP Software business and both companies’ sales forces will begin reference-selling each others’ products.
HP forecasts that on a non-GAAP basis, the combined HP Software business will deliver revenue growth of approximately 10 percent to 15 percent and operating margin of approximately 20 percent in fiscal year 2008.
On a pro forma basis, the transaction is expected to be approximately $0.04 dilutive to non-GAAP per share earnings in fiscal year 2007 and approximately $0.02 accretive to non-GAAP per share earnings in fiscal 2008.
This includes purchase accounting adjustments related to deferred revenue write downs and deferred compensation expense of approximately $US141 million, or $0.05 per share, in fiscal 2007 and approximately $US43 million, or $0.01 per share, in fiscal 2008, as well as expected synergies.
The acquisition will be conducted by means of a tender offer for all of the outstanding shares of Mercury, followed by merger of Mercury with an HP subsidiary.
