Shares of Agile jumped 11 percent on the news, marching up $4.75 to $47.56 in early trading. Ariba's stock dropped 10 percent before the opening bell, down $3.87 to $36.12.
Despite beating estimates for its latest quarter, Ariba's stock has fallen recently on concerns about the company's growth projections.
Agile will bolster Ariba's software offering. Agile makes a Web-based, collaborative software suite called Anywhere. The suite helps global companies and their partners add, update, and manage product content throughout the manufacturing supply chain.
Under the terms of the agreement, each share of Agile common stock will be converted into 1.35 shares of Ariba, resulting in total purchase of around $2.55 billion, based on Friday's closing price on Ariba common stock.
Ariba officials said they expect the deal to be accretive to the company's earnings in fiscal year 2002, which begins in October. Agile will report its fiscal third quarter earnings next month. The company is expected to break even, according to First Call.
The deal, expected to close in the fiscal third quarter, has already been approved by the boards of both companies, but it is still subject to regulatory and shareholder approval.
According to a research note from Robinson-Humphrey, Ariba is getting a solid business. Agile Software's business is strong and, in the brokerage's view, the slowdown in high-tech markets will not have an "appreciable" effect on the company's 2001 revenues. The assessment was based primarily on a survey of the company's customers.
"Overall we believe a delighted customer base, a compelling ROI story and a growing network effect point to strong growth potential for Agile," the note stated.
As for Ariba, analysts have voiced concerns about the company's growth prospects. In a recent note, Lehman Brothers analyst Patrick Walravens reiterated a "market perform" on the stock.
In his note, Walravens highlighted the lack of supplier content on the Ariba commerce services network (CSN), lack of certain sophisticated payment and logistics services, the implementation of new supplier initiatives, including its supplier hubs program, and buildout of commerce services as developments to watch over the next two quarters.