IBM Corp. said Thursday it plans to acquire Costa Mesa-based FileNet Corp. for $1.6 billion in yet another consolidation move in the software industry.
Shareholders of FileNet, one of Orange County’s oldest software makers, will get $35 a share, a slight 1% premium to its closing price on Wednesday.
FileNet’s stock rose to $35.61, or nearly 3%, in midday trading, with IBM’s stock up less than 1%.
With the addition, IBM gets a leg up in the fast-growing enterprise content management market. FileNet was among the leaders, while IBM was a bit of a laggard, according to some analysts.
“The combination of IBM and FileNet will deliver increased innovation and industry-focused content management solutions,” said Lee Roberts, FileNet chief executive, in a press release. “At the same time, this transaction offers FileNet shareholders a solid premium over historical trading prices of our stock.”
The agreement still is subject to the approval of shareholders and regulators.
IBM said it intends to combine FileNet’s operations with IBM’s Content Management business in its Information Management unit.
“IBM plans to build upon the advanced Content Management technologies of both companies,” the company said in a press release.
FileNet is Orange County’s third-largest software company by sales, according to the Business Journal.
It was founded in 1982 by Ted Smith, who was chief executive until 1998 when Roberts took over. Smith still sits on the board of the company.
The announcement ends months, if not years, of speculation about a buyout of FileNet.
In a Business Journal story last week, Roberts said, “I know there is a lot of consolidation” in the industry. “I have a responsibility to listen if somebody asks. I don’t know what they’re thinking.”
FileNet was becoming an increasingly attractive takeover target after a break-out second-quarter report that beat estimates.
Adjusted net profit was $11.1 million, up 28% from a year earlier. Analysts were expecting profit of about $10.1 million. Sales rose 12% to a record $117.1 million from a year earlier. Analysts expected revenue of $111.6 million.
The company’s outlook for the current quarter beat estimates as well. Investors recently bid up the stock to levels not seen since the bubble days of 2000.
