LONDON (Reuters) - Britain's Autonomy Corp Plc agreed on Friday to buy U.S. peer Verity Inc for $500 million in cash to gain a dominant position in the information handling software market and boost earnings.
Autonomy shareholders will be offered one new share at 256 pence for every two held. The rest of the financing comes from a term loan of $38 million, existing Verity cash reserves of $180 million and Autonomy's cash reserves of $10 million.
"This is an acquisition that is expected to create a strong undisputed global leader in the unstructured information management market," Autonomy's Chief Executive and co-founder Mike Lynch told reporters on a conference call.
"This opens us a whole series of cross-selling opportunities across 16,000 combined customers, and we see a high level of complementarity between the businesses."
Autonomy, whose software helps streamline the handling of content on computers, said the deal was expected to be earnings accretive in the first full quarter following completion, expected in late 2005.
The UK company, whose customers include IBM, Boeing and several U.S. federal agencies and the U.S. army, said it expected to achieve annualized cost synergies of $20 million in the first year following the deal.
Chief Financial Officer Sushovan Hussain said the savings would come primarily from cutting regulatory costs in the United States, duplicative sales and marketing expenses and lower audit, tax, legal and insurance costs.
Shares in Autonomy leapt to their highest levels in over seven weeks on the deal. The stock was nearly 13 percent higher at 362 pence by 1000 GMT, giving the company a market value of around 432 million pounds.
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