by CIO Staff

HP to Purchase Mercury Interactive for $4.5B

Jul 26, 20062 mins
Mergers and Acquisitions

Hewlett-Packard, the PC giant, said it will purchase Mercury Interactive, a business software producer, for $4.5 billion, in what would be HP Chief Executive Mark Hurd’s first major purchase with the firm, The Wall Street Journal reports.

Mercury develops applications that enable corporations to create and vet their own business software as well as oversee their related development efforts, but the Mountain View, Calif.-based company has been in the limelight throughout recent months for its part in the widely publicized stock-options grant backdating scandal, according to the Journal.

Hurd, HP’s chief executive since March 2005, in the past said that he will focus his efforts on purchases of small entities, the Journal reports. Though this focus hasn’t changed, Hurd said the Mercury deal was just too good to turn down, according to the Journal.

“I am confident that this transaction demonstrates that HP is building a software business that is to be reckoned with,” Hurd told reporters, according to the Journal.

HP is to pay Mercury stockholders $52 per share, or 33 percent per share more than the company’s closing price on Tuesday afternoon, the Journal reports. Mercury’s current cash and debt is included within the $4.5 billion figure, according to the Journal.

Hurd said the company looked into Mercury’s stock scandal issues, and that he wasn’t overly concerned, the Journal reports.

“We are comfortable that the issues will be resolved,” he said, according to the Journal.

Last year, Mercury booted Chief Executive Amnon Landan and two other company representatives for their roles in backdating dozens of stock grants to boost their potential values to recipients, the Journal reports. Mercury has yet to file a 2005 annual report as a result of the stock-options scandal, but the deal between it and HP won’t go through before the report is filed, HP said, according to the Journal.

HP claims that if the deal goes through it can increase its software business’ annual revenue to $2 billion, and by fiscal 2008, the company said the business could deliver revenue growth of 10 percent to 15 percent with a 20 percent operating profit margin, the Journal reports.

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