IBM to Buy Rational for $2.1 Billion
AARMONK, N.Y. (Reuters) - International Business Machines Corp. (IBM.N) said on Friday it would buy Rational Software Corp. (RATL.O) for about $2.1 billion in cash, a deal that expands IBM's role in the market for tools companies use to make custom software.
IBM said it would pay $10.50 per share for Rational, based in Cupertino, California -- a premium of about 28 percent over Thursday's Nasdaq closing price of $8.17.
The companies said the deal should close in the first quarter of 2003.
For IBM, the world's largest computer company, the deal is its biggest software acquisition since the $3.5 billion purchase of Lotus Notes Corp. in 1995 and marks its latest move away from the computer hardware business that had been its trademark for decades.
IBM, based in Armonk, New York, is in the process of selling its hard disk drive business to Hitachi Ltd. (6501.T) for $2.05 billion, and in October it closed the purchase of the consulting business of PricewaterhouseCoopers for $3.5 billion, expanding its computer services operations.
IBM expects the Rational deal to strengthen its position in the $9 billion-a-year software-development business -- a market that is expected to grow to about $15 billion annually in the next three years.
In premarket trading on the Instinet electronic trading network, shares of Rational surged to $10.35 while IBM shares fell to $81.20, down $1.86 or about 2 percent from Thursday's close on the New York Stock Exchange of $83.06.
12/06/02 08:14 ET
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