Under the deal, Borland plans to pay $2.75 per share for Santa Ana, Calif.-based Starbase, which creates tools for software developers. The price reflects a threefold increase over Starbase's closing market value of 80 cents per share on Tuesday. In late-morning trading, Starbase shares were up $1.89, or about 236 percent, at $2.69.
Shares of Borland, which is based in Scotts Valley, Calif., gained 49 cents in morning trading at $8.31.
"Starbase is recognized for its market-leading solutions in the areas of requirements management, version control, collaboration and defect tracking," Frederick Ball, Borland's chief financial officer, said in a statement.
Some analysts also praised the acquisition.
"I think the deal is a nice complement to Borland's products...it helps them grow their revenues and get into international markets and offer a more comprehensive suite of products," Merrill Lynch's Peter Goldmacher said. "But of course, the devil is in the details."
Goldmacher added that Borland, despite the overall downturn in IT spending, has fared well and could have easily maintained its momentum without this deal.
The deal is subject to regulatory and shareholder approval. In the interim, Borland has loaned $2 million loan to Starbase to help fund its operations.