CA to buy Netegrity for $430 million

By siliconindia staff writer   |   Thursday, 07 October 2004, 19:30 IST
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NEW YORK: Computer Associates International Inc. will buy Netegrity Inc. for about $430 million, adding a key Web security product as it expands in the fast-growing security software sector, the company informed. Computer Associates said the deal -- its biggest acquisition since 2000 -- values Netegrity at $10.75 a share, which represents a 39 percent premium over its Tuesday closing price. "Security continues to be critically important to CA," Chief Executive Kenneth Cron said in a statement. He said the addition of Netegrity's Web security product deal would strengthen CA's position in identity and access management. Trip Chowdhry, an analyst with FTN Midwest Research said, "CA is taking the right step at the right time and price." "Netegrity can be easily integrated into the Unicenter framework and there is an industry trend of convergence," Chowdry, said, referring to CA's main business of systems management software. Computer Associates, which has grown over the years through about 50 acquisitions, refrained from making big acquisitions as long-running government probes have depressed its stock, making it difficult to carry out large deals. As the probes wind down, CA's new management has decided to pursue acquisitions to spur growth as its main system management business matures. Netegrity's identity and access management software will be integrated with CA's eTrust group. The majority of its approximately 400 employees will remain with CA, which last month said it would cut 800 jobs. The deal, which is expected to be neutral to CA's earnings in fiscal 2005 but to add slightly to them in 2006, will cost Computer Associates $340 million net of the cash and marketable securities on Netegrity's balance sheet. The transaction, subject to approval by Netegrity stockholders and regulators, is expected to be completed in the next 90 days, CA said. Computer Associates said stockholders representing approximately 10 percent of outstanding shares of Waltham, Massachusetts-based Netegrity have agreed to vote in favor of the transaction. Netegrity said it expects third-quarter revenue to be $19 million to $21 million. On a net basis, it expects results to range between a loss of $1 million, or 3 cents a share, and breakeven. Excluding amortization cost, Netegrity sees a loss of 2 cents a share to a profit of 1 cent a share