Monday, September 20, 2010

IBM to buy Netezza for $1.7bn in cash

IBM on Monday announced an agreement to buy Massachusetts-based Netezza Corporation for $1.7bn in cash, in a deal which adds to recent deal-making momentum in business software and services.

An acquisition by the US technology group of the data warehousing and business analytics company would follow Hewlett-Packard’s victory over Dell this month in the battle to acquire storage technology company 3Par for $2.4bn.

There was no immediate sign of a rival to IBM’s bid, but analysts would not rule one out as Netezza’s share price climbed 13 per cent to $27.80 in midday trading on Monday, above IBM’s offer of $27 a share.

“Someone could swoop in at the eleventh hour and try to outbid IBM,” said Shawn Rogers, analyst at Enterprise Management Associates.

“There were whispers on the street that Netezza was on the block and many of us thought that HP would be the one to buy them, so [a counterbid] would be no surprise.”

Netezza would have to pay IBM $56m if it terminates the deal. 3Par paid Dell a $72m break fee in order to accept HP’s final offer of $33 a share, which was more than three times the $9.65 3Par was trading at before Dell’s initial $18 bid.

IBM’s offer represented only a 10 per cent premium to Netezza’s closing price on Friday, although analysts at Stifel Nicolaus pointed out that Netezza was trading at only about $14 prior to Dell’s 3Par bid in August.

“We expect [the IBM deal] to continue to support ongoing M&A-driven valuations across the technology landscape,” they said, citing likely future investor interest in technology companies such as CommVault, Compellent, Isilon and NetApp.

IBM said the Netezza deal would help it expand its business information and analytics offerings. Net-ezza’s 500-strong workforce would supplement 6,000 IBM consultants in this area. IBM’s analytics business grew 14 per cent year-on-year in the second quarter and it has spent $12bn in 23 analytics-related acquisitions over the past four years. Sam Palmisano, IBM chief executive, said in May he was planning $20bn in acquisitions over the next five years.

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