IBM to acquire Ascential for $1.1 billion

Big Blue said the deal will complement its information integration business, which it said produced triple-digit growth in 2004.

Ascential reported a 46 revenue increase to $271.9 million for 2004.

The planned acquisition "is about being able to take advantage of market momentum," said Janet Perna, the executive in charge of IBM's information management software division. "(It) will enable IBM to complete its information integration portfolio very quickly."

Janet Perna
General manager,
Data managment
solutions, IBM

IBM will pay $18.50 per share for Ascential, which is based in Westborough, Mass. The acquisition is subject to Ascential shareholder and regulatory approvals, as well as other customary closing conditions. The buy is expected to close in the second quarter, IBM said.

Big Blue plans to establish Ascential as a business unit within its information management software division and incorporate the company's products into its product line.

IBM said that it decided to buy Ascential rather than build the software itself in-house in order to more quickly get products onto the market. Information integration is becoming a high priority as companies look to combine data from different systems and get a better picture of a company's ongoing operations.

Ascential's current CEO, Peter Gyenes, is expected to take a position in IBM's software group, reporting to Perna. Current Ascential employees will be offered positions at IBM, and there are no layoffs planned, an IBM representative said Monday.

During a conference call with investment analysts, executives at Ascential said the companies intend to combine their existing product lines, which they described as complementary. IBM now resells some of Ascential's software.

IBM's information integration products are designed to query multiple data sources in different locations. Ascential's main products, meanwhile, are for transporting data into a single store so it can be analyzed, Ascential executives said.

Gyenes said that the timing of IBM's offer and the company's desire to sell a broad suite of integration-related tools drove the deal.

Peter Gyenes, CEO,
Ascential Software

"It was the arising of the opportunity that dictated the timing," Gyenes said. "The collection of capabilities that ultimately, when the combination materializes, will be offered--that's what is competitive."

Gyenes said competitors include Microsoft, Oracle and SAP.

Ascential will be the eighth company IBM has bought in the information management area since 2001.

Some financial analysts question the valuation of the deal. At $18.50 per share, the IBM offer was nearly 18 percent higher than Ascential's closing price of $15.70 on Friday.

"The premium was not as high as other (transactions) that we've seen," said Philip Rueppel, an analyst at America's Growth Capital. "But I think it was a good deal for the shareholder, as well as a good deal for the company, because it really makes sense for Ascential to be part of a broader platform."

Ascential's main competitor on a standalone basis is Informatica, which has a partnership with IBM, Rueppel noted.

IBM's planned acquisition of Ascential "does create a little cloud over Informatica, over what kind of relationship they will have with the consulting arm of IBM, as well as how successful they can be as (an) independent company in a market that is fast becoming dominated by larger companies," he said.

Ascential opened at $18.33 on Monday morning.