HP to acquire Mercury for $4.5 billion

HP said on Tuesday that it was buying Mercury Interactive for $4.5 billion in a deal to become a leader in IT management software.

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HP will pay $52 per share for Mercury in a deal that will combine that company's suite of application management software and services with HP's OpenView family of network and IT service management software, HP said in a statement.

The deal is subject to a number of conditions, but it scheduled to close in the fourth quarter of 2006. Among other things, Mercury will have to file an Annual Report on Form 10-K for fiscal year 2005 before the deal can be consummated, HP said.

Mercury is a leader in the emerging area of BTO (business technology optimization) products that manage and track the performance and profile of enterprise applications and reduce the costs associated with deploying them.

Together with HP's OpenView platform, Mercury's strength in BTO, application change management, and IT governance will allow HP to become an "end to end" IT management company with products that can track IT assets from planning through deployment and operations, according to a statement by Thomas E. Hogan, senior vice president of software at HP.

Mercury has been sailing in choppy waters in recent months.

An SEC investigation probe of the company's accounting methods in 2005 led to the resignation of the company's CEO and CFO in November, 2005. The company was delisted from the Nasdaq Stock Market in January.

In early July, the company was forced to restate its earnings for fiscal years 2002 to 2004 because previous statements did not recognize compensation from internal stock option grants.

Despite its accounting woes, the company has continued to grow. The company purchased SOA vendor Systinet for $105 million in January, then last month announced plans to spend another $18.5 million buying technology from Vertical Solutions Inc. (VSI) and research and development staff and facilities from Tefensoft.