Software Firms Ink $3.5B Deal

Shares of Platinum Technology soared Monday morning after Computer Associates (CA) said it will buy the software services company for about $3.5 billion in cash.

Computer Associates - the third-largest software company - said the deal will add 25 cents to operating income over the next year.

The take-out price for Oakbrook, Terrace, Ill.-based Platinum (PLAT) is 29 1/4, two and half times Friday's closing price and just under their 52-week high. Platinum shares rose to 25 on news of the deal.

Computer Associates shares were down 1 7/16 to 32 1/2.

Memco Software is another stock that figures into Monday's deal, which is one of the largest in the software industry. Platinum said last August that it will swap 0.836 share for each share of the Israeli company (MEMCF), and Memco has traded down in tandem with Platinum.

Representatives for Computer Associates and Platinum weren't immediately available for comment about the deal on Monday.

Computer Associates has a made a number of acquisitions in its history, but it typically buys smaller companies that have hit a tough spell.

Platinum shares have lost about half their value so far this year, as weakness in European sales and training revenue wracked the company.

Company representatives had made no secret of their plans to acquire service companies in recent months. Doug Robinson, Computer Associate's head of investor relations, told investors at a technology conference sponsored by Nationsbanc Montgomery Securities last month that Computer Associates will look to pick up companies that help implement and manage software.

For its own part, shares of Computer Associates currently trade about half their 52-week high. The company has blamed a slowdown in big-ticket software ahead of the change of the millennium as well as sluggish foreign sales.

Written By Brenon Daly, CBS MarketWatch