BMC Software Inc yesterday moved to acquire New Dimension Software Ltd for $650m in cash, which will take it past rival Compuware in revenues and, it believes, set it on the path to join the heavyweights among software companies.
BMC is paying $52.50 per share, which is just a 7% premium over New Dimension’s closing price on Friday. BMC says the deal will be immediately accretive and is expected to close within 60 days, as it is a cash acquisition. The company says it did not use shares because it believes its stock is currently undervalued. BMC will take a charge of up to 30% of the offer price for in- process research and development and says it has the approval of two shareholders that hold more than 60% of the stock.
BMC is still in the process of closing the November acquisition of Boole & Babbage Inc, and now says that will happen by the end of this month, which is also the end of BMC’s fiscal year. The combination of the three companies gives it trailing twelve-month revenues of $1.4bn. BMC is promising to start re-tooling itself at the end of April to push its sales further into the billions. That re-tooling is expected to include further acquisitions.
The main things BMC wants from New Dimension are its job scheduling, enterprise output management and security and administration software. There is a hefty amount of customer overlap between the two – around 80% – but BMC says it is in different vertical software areas and that the overlap is to be expected when you target the top 5000 companies in the world.
The acquisition has also removed any doubts about New Dimension’s role in the acquisition of Boole & Babbage, which derives around 14% of its revenues from selling New Dimension’s software in Europe and Asia-Pacific. New Dimension had the right to terminate its agreement following the B&B acquisition, but that is obviously not an issue now. New Dimension is based in Tel Aviv, Israel, with a US headquarters in Irvine, California. Of its 1998 revenues of $93m, some $64m came from sales in the US, where more than half its employees are based. Most of the research and development is done in Israel. The company will remain intact as a BMC business unit and most of its employees will be retained. The enlarged BMC will have around 5,000 employees in 26 countries once both the acquisitions have closed.
