Computer Associates to Buy Rival Platinum Technology

Computer Associates International Inc., tightening its grip on the corporate software market, said Monday that it would buy smaller rival Platinum Technology International Inc. for $3.5 billion in one of the biggest deals ever in the software industry.

Computer Associates, which is renowned for its 20-year practice of swallowing up weaker rivals, said it would pay $29.25 a share in cash for Platinum, or just over triple the value of Platinum’s closing share price Friday of $9.88, through a tender offer.

The Islandia, N.Y.-based company said the acquisition gives it key Platinum data storage and management software that provides the plumbing to run large corporate computer networks or enterprise systems.

Platinum Technology, based in Oakbrook Terrace, Ill., provides software products and consulting services that help companies manage and improve systems and database management, e-commerce, data warehousing and year 2000 re-engineering. The 12-year-old company had 1998 revenue of $968 million and 4,330 employees.

Company executives said some layoffs were expected, although they did not have an exact number and said it would be mitigated by a worldwide hiring freeze Computer Associates implemented Monday.

The boards of both Platinum and Computer Associates have approved the transaction.

Platinum Chief Executive Andrew Filipowski said it is in the company’s best interests to be acquired by someone else. Platinum’s stock had fallen sharply as sales slumped because of the Asian economic crisis.

Computer Associates expects the deal to add 25 cents to its earnings per share in the first year after it closes, excluding certain charges.

The company said it will finance the offer with a new $4.5-billion credit facility underwritten by Credit Suisse First Boston.

Platinum shares soared $14.19 on the news to close at $24.06 on Nasdaq. Computer Associates rose $3.06 to $37 on the New York Stock Exchange.