IBM to buy Ascential for $1.1bn

IBM said it will acquire Ascential Software, a maker of data integration tools, for $1.1bn.

Big Blue said the deal will complement its information integration business, which it said produced triple-digit growth in 2004.

Ascential reported a 46 per cent revenue increase to $271.9m for 2004.

"Information integration is an important enabler of an on-demand business strategy, and customers are increasing their investments in software that allows them to rapidly analyse, consolidate and extract value from their business data," Steve Mills, senior vice president of IBM's software group, said in a statement.

IBM will pay $1.1bn, or $18.50 per share, for Ascential. The acquisition is subject to Ascential shareholder approval and regulatory approvals, as well as other customary closing conditions. The buy is expected to close in the second quarter, IBM said.

Big Blue plans to establish Ascential as a business unit within its information management software division, which is led by Janet Perna, and incorporate the company's products into its product line.

Ascential's current CEO and chairman, Peter Gyenes, is expected to take a position in the information integration division of IBM's software group, reporting to Perna. Current Ascential employees will be offered positions at IBM, and there are no layoffs planned, an IBM representative said on Monday.

During a conference call with investment analysts, executives at Ascential said the companies intend to combine their existing product lines, which they described as complementary. IBM now resells some of Ascential's software.

IBM's information integration products are designed to query multiple data sources in different locations. Ascential's main products, meanwhile, are for transporting data into a single store so it can be analysed, Ascential executives said.

Gyenes said that the timing of IBM's offer and the company's desire to sell a broad suite of integration-related tools drove the deal.

"It was arising of the opportunity that dictated the timing," Gyenes said. "The collection of capabilities that ultimately, when the combination materialises, will be offered - that's what is competitive."

Gyenes said competitors include Microsoft, Oracle and SAP.

Ascential will be the eighth company IBM has bought in the information management area since 2001.

Some financial analysts question the valuation of the deal. At $18.50 per share, the IBM offer was nearly 18 per cent higher than Ascential's closing price of 15.70 on Friday.

"The premium was not as high as other [transactions] that we've seen," said Philip Rueppel, an analyst at America's Growth Capital. "But I think it was a good deal for the shareholder, as well as a good deal for the company, because it really makes sense for Ascential to be part of a broader platform."

Ascential's main competitor on a standalone basis is Informatica, which has a partnership with IBM, Rueppel noted.

IBM's planned acquisition of Ascential "does create a little cloud over Informatica, over what kind of relationship they will have with the consulting arm of IBM, as well as how successful they can be as [an] independent company in a market that is fast becoming dominated by larger companies," he said.

Ascential opened at $18.33 on Monday morning.

Mike Ricciuti and Martin LaMonica write for CNET News.com