"ISLANDIA, NY and DALLAS, TX, February 14, 2000 -Computer Associates International,
Inc. (NYSE: CA) announced an agreement to acquire Sterling Software, Inc. (NYSE:
SSW), extending its arsenal of software and services to build, deploy, manage
and secure eBusiness solutions.
$4 billion stock-for-stock acquisition, which would be the largest ever in the
history of the software industry, has been approved unanimously by the Boards
of Directors of both Sterling Software and CA. The acquisition is expected to
be accretive to CA's earnings per share, excluding any one-time research and
development charge and amortization of acquisition intangibles, and is subject
to certain closing conditions, including regulatory approvals. The acquisition
will be accounted for using the purchase method.
terms of the agreement, a subsidiary of CA will commence an offer to exchange
0.5634 shares of CA stock for each outstanding Sterling share. The exchange
ratio is subject to a collar. If the average trading price of CA stock for the
designated period prior to the closing of the offer is greater than $77.12,
the exchange ratio will be reduced so that each Sterling share tendered in the
offer would be exchanged for $43.45 worth of CA stock. 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 tendered in the offer would be exchanged
for $35.55 worth of CA stock. In this case, CA may elect to reduce the exchange
ratio and make up the difference in cash and or stock.
tender offer will be followed by a back-end merger on the same terms of those
in the offer. The offer will be subject to customary closing conditions, including
that at least a majority of Sterling's outstanding shares has been tendered
and antitrust clearance obtained. The parties expect the transaction will be
one of the first to take advantage of the SEC's new "fast track" exchange offer
rules designed to expedite stock-for-stock transactions.
Software is a leading provider of software and services for the application
development, business intelligence, information management, storage management,
network management, VM systems management, and federal systems markets. The
company is one of the 20 largest independent software companies in the world.
Headquartered in Dallas, Sterling Software has a worldwide installed base of
more than 20,000 customer sites and 3,800 employees in 90 offices worldwide.
Computer Associates International, Inc. (NYSE: CA) has 18,000 employees worldwide
and had revenue of $6.3 billion for the year ended December 31, 1999."
also intends to publish papers on product development strategies and directions
shortly after completion of the acquisition.
On the upside, Computer Associates gains an additional 90 products to add to
their stable of many hundreds of current offerings. Sterling's mainframe and
storage management technologies, added to what CA already has, will create the
industry's largest supplier. CA should also gain additional consulting resources
from Sterling. "The merger of Sterling Software and CA brings together two outstanding
organizations that share common values, and have compatible strategies and track
records of achievement," said Charles B. Wang, CA chairman and CEO.
However, as evidenced by Computer Associates purchases of Cheyenne, Legent,
Platinum Technology, and others, the assimilation of different corporate cultures
and software products has led to a very high rate of employee turnover from
the acquired firms, strained communication with the acquired employees, and
a tremendous lag in software release dates.
has built a $6 billion dollar business by, in part, stabilizing products from
acquired companies and maintaining substantial maintenance revenue streams without
providing new major releases to customers. In addition, CA does not have a strong
history of retaining employees of the acquired companies that have departed
other CA acquisitions during the purchase process, or who have left CA proper.
This potential loss of valuable employees could be damaging to product sales,
development, and support.
Customers evaluating Sterling products based on existing functionality should
continue the selection process, keeping an eye on CA's announcements for future
product direction. For customers who believe they can receive positive return
on investment in a fairly short term, and can support the product in-house,
it may be a safe investment. However, customers should keep in mind that potential
major upgrades to other software in their environment (i.e., the operating system
on which the tool runs) may cause Sterling's software to malfunction, and if
the product has been stabilized, there may be no fix available.
evaluating Sterling products based on future enhancements should be extremely
cautious. They should press Computer Associates to provide firm release schedules
and product visions in writing before purchasing any of Sterling's offerings.
Computer Associates often has visions for integration of their products with
acquired products (i.e., CA's plans to combine their Neugents neural network
technology with Sterling's products), but this often has the effect of forcing
delays in the general availability of products.