CA snaps up Platinum in $3.5bn takeover

Software In what has been billed as the largest buy in software history, vendor aims to hit growth rates of 20 per cent.

Computer Associates (CA) has agreed to acquire Platinum Technologiesory, vendor aims to hit growth rates of 20 per cent. for $3.5 billion in cash, in a deal it claims is the largest in software history.

The move follows Platinum's failure to buy rival Boole & Babbage in 1998 after BMC stepped in, and a profit warning on 14 January when the company announced it would lay off 1,000 staff.

CA said it approached Platinum on 22 March about the takeover. The transaction has already been approved by both companies' shareholders and CA plans to pay $29.25 for each Platinum share - almost three times its closing price last week of $9.875.

The deal will create a $6 billion company, with Platinum contributing $1 billion in revenue. Growth rates are anticipated to be about 20 per cent year on year.

Sanjay Kumar, president and chief operating officer at CA, said: 'We're paying a substantial premium but, according to our estimates, Platinum will have an immediate accretive value over the next 12 months, without taking one-time charges and restructuring into consideration.

'We will introduce operational efficiencies, which will enhance our revenue and add $0.25 to our earnings per share in the first 12 months.

We'll generate $450 million in additional cash each year and we're paying in cash with a credit line from Credit Suisse First Boston with a four-year repayment schedule.'

Although he refused to comment on restructuring details or indicate how many Platinum staff would be made redundant, Kumar said CA had introduced a hiring freeze and would try to redeploy as many employees as possible.

He emphasised that where overlap occurred between the two companies' products sets, both would continue to be supported.

Kumar said the acquisition would improve the position of CA's database product, Jasmine, by creating 'end-to-end value-added applications'. 'We'll cover the scoping, design, development, warehousing and deployment of applications - and we'll be the first vendor to do so,' he claimed.

The purchase would also enhance CA's growing services business by adding Platinum's 1,000 consultancy personnel to its 3,000-strong organisation, Kumar added.