After 13 years building Platinum Technology Inc into a billion dollar management and database powerhouse by acquiring approximately 60 companies over the last four years, president and CEO Andrew Filipowski has decided to throw in the towel and plans to sell the business to erstwhile rival Computer Associates International Inc (CAI) in a cash purchase – the largest to date in the software industry – worth $3.5bn. Under terms of the deal, CAI said it has made an offer to purchase all the outstanding shares of Platinum’s common stock, boosted by its recent acquistion of Memco Software, which also closed this week, for $29.25 per share. The merger, which has already been approved by both companies’ boards, will be funded by a $4.5bn loan to CAI from Credit Suisse First Boston, CAI said.
Speaking at a press conference yesterday, Sanjay Kumar, CAI president and CEO said the two companies sat down together for the first time last Monday night. We talked about our various synergies and realized the combination would be a very compelling event….for our shareholders, customers and employees. Although Kumar admitted there has been a lot of noise about competition between the companies’ products in the past, Filipowski said the truth was that it was just good theater and when we came right down to it, there was minimal overlap in the area of systems management only. Kumar also admitted the overlap but said for the main part the companies’ products ran comfortably side by side. He said CAI would concentrate on leveraging Platinum’s specialist products, such as the security software recently acquired through the Memco acquisition, to boost its management offerings.
Outside systems management, Kumar said CAI plans to leverage Platinum’s leadership in three main areas, where CAI has no complimentary standalone products of its own, namely: database tools, datawarehousing and application lifecycle management. Although he said it was too early to give specific details, Kumar said CAI plans to combine Platinum’s tools and datawarehouse software with its own Jasmine object oriented database and Unicentre TNG systems management software. The aim, Kumar said, is to create ‘knowledge portals’ for the enterprise environment. The portals will enable companies to filter data from the internet and combine it with data from internal sources, such as Platinum’s datawarehouse. The data will be stored and analyzed within a Jasmine repository and managed through its Unicentre TNG systems management software. In the same way that CAI’s Neugent software tools currently enable administrators to predict hardware and software trends within the enterprise management space, the company plans to build special agents that leverage both Platinum and CA’s technologies to allow companies to predict trends at the buisness level, for example to predict a crop yield forecast based on weather patterns, the companies said.
As well as providing all the tools necessary to set up the portals, the two companies will also offer services. Kumar said CAI will integrate Platinum’s 1,000 strong consultant team into its Global Professional Services arm. In terms of employees, both CEOs admitted there would be lay-offs at Platinum but neither could say how many staff would go as a result of the merger. In February, Platinum was forced to lay off around 1,000 of its employees following a shortfall in its services business and Filipowski yesterday admitted that the lay-offs still weren’t enough to generate the margins the company needed to keep in line with analysts’ expectations. Kumar said CAI had put in place a hiring freeze as of Monday morning in an attempt to try and transfer as many Platinum employees over to the newly-merged company as possible.
Similarly, it’s still not sure whether Filipowski, or any of the Platinum management team, will join CAI. They may want to take some time off and play some golf, joked Kumar, we’ll have to figure that out as we go along in the next couple of weeks. We’ll do whatever is right, right for our shareholders, our customers and our employees, Filipowski added, we will consider going foward and we will consider contributing in whatever way we can, but there is no preconceived notion about what will happen. Kumar said he expected the tender offer to go through within the next 20 days, subject to the expiration or termination of any applicable antitrust waiting period and the receipt of all regulatory approvals, while the acquistion should close within the next few months. He said CA estimates that, following the completion of the merger and restructuring the transaction will be accretive to net earnings in the first 12 months in the amount of about 25 cents per share, excluding in-process R&D and restructuring charges. In addition, the company anticipates that following the restructuring, the acquisition will generate an additional $450m of cash from operations.
