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Kana to snap up fellow software maker

Kana Communications plans to grab Broadbase Software in a $77 million deal creating a new company focused on enterprise relationship management applications.

    E-commerce software maker Kana Communications said Monday it intends to acquire Broadbase Software in a deal worth about $77 million.

    The combined company will be called Kana Software, a boutique company focused mainly on ERM (enterprise relationship management). The stock market downturn has particularly battered the ERM niche, with shares of Kana and shares of Broadbase down at least 98 percent from their 52-week highs.

    ERM companies build Web-based portals for corporate clients so they can access information about individual customers from a unified site. Such companies also help clients manage e-mail, Web sites, chat rooms, instant messages and phone conversations involving their individual customers, suppliers and corporate partners.

    Broadbase Chief Executive Chuck Bay will become president and CEO of the new Kana Software, while Kana Chief Executive Jay Wood will lose the CEO title but remain chairman of the board.

    The agreement, still subject to shareholder approval, is expected to close in the third quarter. The new company will have more than 1,300 customers including Fortune 500 companies such as American Express, Bank of America, Cisco Systems, General Motors and Microsoft.

    Shareholders of Menlo Park, Calif.-based Broadbase will receive 1.05 shares of Redwood City, Calif.-based Kana for each share of Broadbase exchanged. That is a 28 percent premium for Broadbase shares, which were trading around 72 cents in midday trading Monday.

    The merger may pave the way for the new company to acquire smaller rivals and related businesses, executives said Monday.

    But it is unclear how the new company might buy rivals with its own stock severely depressed.

    Kana stock traded Monday at 88 cents, down 92.4 percent since the beginning of the year and down 54.6 percent since the beginning of the month. It is down nearly 99 percent from its 52-week high of $74.62.

    Broadbase was down 64.6 percent since the beginning of April and down 88.5 percent since January. It has plummeted 98.2 percent from its 52-week high of $41 per share.