Silicon Valley pioneer Hewlett-Packard has agreed to buy technology management software and services firm Mercury Interactive Corp in a cash tender offer worth US$4.5 billion, or US$52 per share.
Once completed, the deal will add to HP's portfolio of information technology management software and services. It is the company's biggest acquisition since it purchased Compaq Computer in 2002 for US$19 billion.
Mark Hurd, HP's chief executive and president, said the merger with Mercury represented 'the most powerful management software portfolio in the industry'.
'Together, they will help customers cut their IT costs, speed the delivery of new services and drive profitable growth at HP. We expect this important acquisition to deliver significant value for our shareholders,' Mr Hurd said.
The Mercury acquisition is expected to increase the size of HP's software business to an enterprise with more than US$2 billion in annual revenue.
HP forecast its expanded software business would deliver revenue growth between 10 per cent and 15 per cent and an operating margin of about 20 per cent in 2008.
The acquisition will be conducted through a tender offer for all of Mercury's shares outstanding, followed by a merger of Mercury with an HP subsidiary. The tender offer is subject to several conditions, including Mercury having filed its annual report on Form 10-K for last year.