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Computer Associates nabs Sterling in $4 billion deal

The business software maker says the acquisition of Sterling Software will help expand its broad range of products and services.

Computer Associates today said it has agreed to acquire Sterling Software in a stock deal valued at $4 billion.

Business software maker Computer Associates (CA) said the acquisition of Sterling Software will help expand its broad range of products. Sterling's products include portal software that provides access to data stored in corporate databases and enterprise application integration (EAI) tools, which is software that enables various business applications to communicate.

Under terms of the agreement, CA will offer to exchange 0.56 shares of its stock for each outstanding Sterling share.

As part of the acquisition, CA said it plans to combine Sterling's products with its own technology, including its information visualization and Neugents neural network technology, a network software product that CA developed last year.

The companies said they also plan to combine the capabilities of Sterling's Cool suite, a bundle of software development tools, with CA's Jasmine database software. The combined software will allow users to connect older computer systems to newer, Internet-based applications, the company said.

The deal has been approved unanimously by the boards of directors of Dallas-based Sterling and Islandia, N.Y.-based CA. The acquisition is expected to add to CA earnings per share, excluding any one-time charges related to the acquisition, and is subject to certain closing conditions and regulatory approvals, the companies said.

The exchange ratio is subject to several restrictions, the companies said. If the average trading price of CA stock for the period prior to the closing of the deal is greater than $77.12, the exchange ratio will be reduced so that each Sterling share in the offer would be exchanged for $43.45 worth of CA stock. But 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 in the offer would be exchanged for $35.55 worth of CA stock.

Founded in 1981, Sterling reported $807 million in revenues in its fiscal year 1999. The company said it has an installed base of more than 20,000 customer sites and 3,800 employees in 90 offices worldwide.

Shares of Computer Associates fell $2.68, or 4 percent, to $67.06 in early trading. Sterling rose $2.38, or 7 percent, to $36.81.