HP agrees to buy Mercury Interactive for $4.5 Billion

The world's second-biggest personal-computer maker, Hewlett-Packard yesterday night announced a $ 4.5 billion cash deal to buy business software maker Mercury Interactive.

The transaction, which also includes the assumption of an unspecified amount of Mercury Interactive debt, is Palo Alto, California-based Hewlett-Packard's biggest since buying Compaq Computer Corp. for $ 18.9 billion in 2002.

The acquisition is the boldest move, so far, for HP Chief Executive Mark Hurd, who has slashed thousands of jobs and reorganized the technology giant's operations since joining HP in March 2005.

Provided the acquisition eliminates regulatory hurdles as expected, the deal should be completed by the end of this year, said Hewlett-Packard vice president Thomas Hogan.
US computer maker, HP intended no changes at Mountain View, California-based Mercury until early next year to avoid disruption during the critical fourth quarter and year-end shopping season, Hogan added.

Mercury shareholders will get nearly $ 52 a share in a cash tender offer, HP said Tuesday. The deal valued Mercury Interactive at $ 52 a share, a 33% premium to its Tuesday closing price of $ 39, and sent its shares surging in after-hours trading.

Buying Mercury, which had sales of $ 843 million in 2005, is anticipated to double HP's workforce to 6,000 employees and increase its software business revenues to more than $ 2 billion per annum. HP forecasted that the acquisition would increase revenues by 10-15% in fiscal year 2008.

HP's software unit has been profitable for three regular quarters. The business made a profit of $ 3 million in the most recent quarter ended April 30.

HP shares tumbled down to $ 30.10 in after-hours trade from a close of $ 31.33 on the New York Stock Exchange.