CA Acquires Sterling Software

Ken Deats

Calling it the largest transaction in the history of the software industry, Sanjay Kumar, COO of Computer Associates (CA, Islandia, N.Y.) announced on Feb. 14 that CA had acquired Sterling Software, the Dallas-based provider of tools for the applications development and business intelligence markets.

The $4 billion stock-for-stock acquisition 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 still subject to regulatory approvals.

“This is a very, very important transaction in the history of CA,” says Kumar, a sentiment echoed by Sterling Williams, founder and CEO of Sterling Software as he added, “It’s a good deal for Sterling, a good deal for CA and a bad deal for our competitors.”

Under terms of the agreement, CA will exchange 0.5634 shares of CA stock for each outstanding Sterling share, an exchange ratio that is subject to a collar. If the average trading price of CA stock for the designated period prior to the closing 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.

Sterling Software solutions are deployed at more than 20,000 customer sites worldwide--including 90 percent of Fortune 100 companies--to create, control, automate and manage both traditional and e-business systems. Sterling Software's portal technology provides access to data stored in corporate databases, in the same way that Internet content portals provide access to content on the Web.

Emphasizing the fact that historically there has not been much direct competition between CA and Sterling and that their respective products lines are complementary, Kumar says that the acquisition “exploits and aggressively launches us into market spaces we’ve not been in before.” By way of example, he cites the combination of Sterling Software's COOL suite and CA's Jasmine information infrastructure as a means of delivering personalized enterprise application integration. Kumar added that he anticipates being able to demonstrate the integration of Sterling and CA product lines at this year’s CA world in New Orleans in April. In addition, he expects to have jointly-developed products on the market within 90 days thereafter.

Related Information:

  • Computer Associates (new window)
  • Sterling Software (new window)