Autonomy acquires Verity for $500 million

Search technology developers combine to take on rivals Google, Microsoft

British search software company Autonomy Corp. has agreed to buy fellow search technology developer Verity in a cash deal totaling around $500 million, the companies announced Friday.

Autonomy Chief Executive Officer Mike Lynch hailed the acquisition as a transformational deal for Autonomy that will give the combined companies a base of 16,000 customers. The deal also brings Autonomy, based in Cambridge, England, a U.S. outpost in Verity's Sunnyvale, California, headquarters.

Autonomy has gained some deep-pocketed rivals in the search market as companies such as Google and Microsoft work to expand their search offerings into enterprise-strength tools. Buying Verity increases Autonomy's scale and diversifies its revenue streams, company executives said.

Founded in 1988, Verity has been consistently profitable for the past five years. In its last fiscal year, the company had revenue of $142.6 million and net income of $7.5 million. Together, Autonomy and Verity would have had revenue of $227 million over the past 12 months, according to Autonomy.

Autonomy agreed to pay $13.50 per Verity share (ticker symbol: VRTY), a 30 percent premium on Verity's Thursday closing price of $10.37, on the Nasdaq exchange.

Autonomy CEO Lynch will remain CEO of the expanded company, while Verity CEO Anthony Bettencourt takes over as CEO of Autonomy's U.S. subsidiary. The company's current U.S. head, Stouffer Egan, will become chief strategy officer of the expanded organization.