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February 2, 1998

BMC SOFTWARE ACQUIRES BGS SYSTEMS FOR $285M

By CBR Staff Writer

Houston-based systems management company BMC Software Inc is acquiring performance management specialist BGS Systems Inc for $285m in stock. BMC has guaranteed BGS $45 in value for each of its outstanding shares and will adjust the exchange ratio accordingly based on the trading average of BMC’s shares 10 days prior to closing. The acquisition of BGS, based in Waltham, Massachusetts, will add its performance analysis and prediction technology to BMC’s Patrol suite of application and data management software, which BMC says gives it the industry’s first complete application service assurance products. The two product lines complement each other well, as BMC has traditionally focused on technology that actively manages data, while BGS has covered the market for products that monitor system performance rather than manipulate it. BMC expects the transaction to be immediately accretive and Morgan Stanley analyst Charles Phillips says it should have no impact on BMC’s fourth-quarter. BGS had revenues of $40m for the first nine months of 1997 and has been growing at a 17-20% rate – below BMC’s growth rate of 30% – but Phillips points out that BMC believes it can change that with the additional distribution it will bring to the BGS product line. The deal, which will be accounted for as a tax-free pooling of interests, is expected to close within 60 to 90 days. As far as competition goes, Phillips feels BMC will now be forced to square off against Computer Associates in another product area, as CA and BGS both have a vested interest in capacity planning in the open systems world. At any rate, Phillips says, there’s probably room for two players in that market as IBM dropped out years ago and the remaining small players will probably get even more marginalized by the BMC-BGS combination.

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