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Technology Stocks : Pure Atria Corp(PASW) and Rational(RATL) Merger
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To: david decamp who wrote (65)4/15/1997 9:49:00 AM
From: Skeptic   of 147
 
I have heard that there is an institutional invetor who owns about 5% of RATL that is lobbying to break the deal. This is an influential stake, but pales in comparison to the 35% or so that is controlled by management.

It seems likely that PASW deferred revenue and accelerated expenses in this quarter, making the numbers look worse than they actually were. This will help RATL make the deal look nondilutive or even accretive right away and could explain RATL's conviction that the merger will be accretive by the December quarter.

The Street doesn't like the deal beacause they don't think investors will. They're questioning why RATL would give up the excellent visibility that they have had. Its simple: because RATL is looking at its market position more than a quarter or two away.

For those of you that think the market-makers are manipulating the stocks, I think you give them too much credit. First of all, they would all have to be in collusion to make this work. Secondly, there are some very astute investors who make their living on mergers and acquisitions who would be more than happy to take the opposite side of any trade that didn't make sense for fundamental reasons. Its much more likely that the majority of investors, including the Street, just don't appreciate the synergies of these two companies. How many of them do you think have ever developed industrial strength software?

This deal offers a terrific opportunity for the small investor. Just stick to your guns and be patient. There is practically no down side for RATL. If you're more adventurous, you can buy PASW, capture the 40% discount, and still own RATL as it evolves into a dominant software vendor over the next couple of years.
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