By Franklin Paul
NEW YORK (Reuters) - IBM (IBM.NY)
The companies said on Tuesday that shareholders of SPSS, which provides predictive software and services to help companies forecast trends and spot shifts in consumer patterns, would receive $50 a share, a 42 percent premium to Monday's closing price of $35.09 on Nasdaq.
The proposed acquisition comes after a spate of deals in recent years in the business intelligence sector, such as Oracle's purchase of Hyperion, SAP's acquisition of Business Objects and IBM's own deal for Cognos.
Other independent names in the arena include MicroStrategy Inc
UBS analyst Maynard Um estimates that SPSS could add 3 cents a share to IBM's 2010 earnings, but said the greatest gain may lie in deeper penetration into the analytics market.
"We believe actual benefits may prove greater as the deal adds to IBM's business and predictive analytics portfolio, which will be an essential part of IBM's smarter business systems and which the company has identified as a significant growth opportunity over the next few years," he said in a note to clients.
Shares of Chicago-based SPSS, a pioneer in the "business intelligence" industry, jumped $14.21 or 40.5 percent to $49.30 this morning. The stock had already risen 30 percent this year.
International Business Machines Corp said the deal would help expand its Information on Demand software portfolio and business analytics capabilities.
For example, Credit Suisse uses SPSS software to analyze information about its customers, then gives leads to its sales force. Police use these systems to mine data from incident reports and crime tips to predict patterns of criminal behavior.
Back in May, IBM Chief Financial Officer Mark Loughridge told the Reuters Technology Summit that the valuations of potential acquisition targets were attractive.
IBM has spent $20 billion buying more than 100 companies since 2000, paying prices that range from as little as $50 million to as much as $5 billion.
The deal values SPSS at about 25 times analysts' estimated 2010 earnings per share, and the $50-per-share price tops the all-time high for the stock of $47.87.
"The predictable analytics area is a really hot area, and I would think that companies in that would trade at a premium to companies in other areas of technology," said Standard & Poor's technology analyst Tom Smith.
"I think they paid a lot for it but it's not unreasonable. They are paying cash, but in terms of cash management, IBM is not going to break too much of a sweat," he said.
The deal, which includes a fee of $23.5 million that SPSS would have to pay should the merger fall through, is subject to SPSS shareholder approval and regulatory clearances, and is expected to close later in the second half of 2009, the companies said.
Separately, IBM said it has acquired closely-held Ounce Labs Inc, whose software helps companies reduce the risks and costs associated with security and compliance concerns. Financial terms were not disclosed.
IBM shares were down $1.05 or 0.9 percent at $116.58.
(Reporting by Franklin Paul; Editing by Derek Caney and Gerald E. McCormick)
