The business-to-business software and services company says it will buy Agile Software in a stock swap.
Shares of Agile jumped 11 percent on the news, marching up $4.75 to $47.56 in early trading. By the close, the stock was up $7.56, or almost 18 percent, to $50.38. Ariba's stock dropped 10 percent before the opening bell, down $3.87 to $36.12. At the end of the regular session, Ariba was down $1.63, or about 4 percent, to $38.38.
Despite beating estimates for its latest quarter, Mountain View, Calif.-based Ariba's stock has fallen recently on concerns about the company's growth projections.
San Jose, Calif.-based Agile will bolster Ariba's software offering. Agile makes a Web-based, collaborative software suite called Anywhere that's designed to help 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 of Ariba common stock.
Ariba executives said they expect the deal to add 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.
"We've taken a huge step forward today to expand our leadership" in business-to-business, Ariba COO Larry Mueller said during a conference call Monday.
Mueller added that both companies will immediately focus on tackling integration efforts including product integration and combining their sales teams with goals to introduce a completely integrated product line by this summer.
According to a research note from Robinson-Humphrey, Ariba is getting a solid product. Agile'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 (return on investment) 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; the lack of certain sophisticated payment and logistics services; the implementation of new supplier initiatives, including its supplier hubs program; and construction of commerce services as developments to watch in the next two quarters.
News.com's Melanie Austria Farmer contributed to this report.