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CA buys Sterling Software for $4B

Computer Associates International (NYSE: CA) said Monday it will acquire e-business software company Sterling Software (NYSE: SSW) in a stock swap valued at $4 billion. The purchase will bolster CA's e-business software products.

Software giant CA said the acquisition of Dallas-based Sterling will be accretive to earnings per share, excluding any one-time research and development charge and amortization of acquisition intangibles. The deal has been approved by both companies' boards of directors.

Under terms of the agreement, CA, based in Islandia, N.Y. will exchange 0.5634 shares of CA stock for each outstanding Sterling share.

The companies also put in a collar on the deal. If the average trading price of CA is greater than $77.12, the exchange ratio will be reduced so that each Sterling share tendered in the offer would be exchanged for $43.45 worth of CA stock. If the average trading price of CA shares for the period is less than $63.10, the exchange ratio will be increased so that each Sterling share tendered in the offer would be exchanged for $35.55 worth of CA stock. CA said it can reduce the exchange ratio and make up the difference in cash and or stock.

The companies said they would combine Sterling products with CA's Jasmine platform. The companies also highlighted their breadth of storage technology that will include distributed backup and recovery products, as well as storage area network software.

"CA's business, built on a combination of world- class technology and high value-added consulting services, will immediately benefit from complementary technology and services from Sterling Software," said Sanjay Kumar, CA president, in a statement. "The combined company will be able to exploit the incredible opportunities of the Internet era."

Sterling Software has 3,800 employees and CA has 18,000 employees. The companies didn't mention job cuts, cost savings or whether Sterling Software CEO Sterling L. Williams would remain after the merger.

Sterling Software also reported strong first quarter earnings last week. The company reported operating earnings of 44 cents a share on sales of $207.0 million. Including charges and acquisition expenses, Sterling reported earnings of 36 cents a share.