IBM to Buy Rational Software for $2.1 Bln in Cash (Update1)
By Ron Day
Armonk, New York, Dec. 6 (Bloomberg) -- International Business Machines Corp., the world's largest computer maker, agreed to buy Rational Software Corp. for about $2.1 billion in cash to add software-building programs to its product line.
IBM is paying $10.50 a share for Rational Software, 29 percent more than the closing price yesterday. Rational Software, based in Cupertino, California, has 3,400 employees, the companies said in a statement distributed by Business Wire. More than 600,000 developers use Rational's software.
IBM, a Rational Software customer, has bought six software companies this year. Rational Software is facing increased competition from rivals including Oracle Corp, the world's third- largest software company, and Computer Associates Inc., the world's fifth-largest software company. Rational Software will be the largest IBM software acquisition since its $3.5 billion purchase of Lotus Development Corp. in 1995.
Shares in Rational Software rose $2.18, or 27 percent, to $10.35 at 7:26 a.m. on Instinet, an electronic trading system. They've declined 58 percent this year. IBM, based in Armonk, New York, fell 63 cents to $83.06 yesterday.
The companies expect the purchase to be completed in the first quarter.