HP to buy Mercury for $4.5bn

Troubled Mercury is to be snapped up by HP to fill out the IT giant's management software portfolio

Hurd: end-to-end management

Hewlett-Packard yesterday announced it will pay $4.5 billion to acquire software testing and IT governance software specialist Mercury Interactive.

The proposed deal – which represents a 33 percent premium on Mercury's share price - will bring to an end months of speculation about Mercury's future. The company was delisted from the Nasdaq stock exchange at the start of this year following an accountancy scandal that led to the resignation of its chief executive and CFO.

HP president and CEO, Mark Hurd, said that combining HP's OpenView management software portfolio with Mercury's testing, application governance and service oriented architecture (SOA) management suites will allow the company to offer " end-to-end management of the entire IT lifecycle".

"[Together] we can build an ERP-like capability for the management software market," Hurd added.

Despite the recent accountancy scandal and an on-going SEC investigation into Mercury's financial practices that saw three current executives and the company's former CFO served Wells Notices earlier this month, HP insisted there were no unforeseen liabilities and claimed it was happy with its due diligence.

Mercury had recently sought to distance itself from the scandal and begin the path back to relisting after restating financial results for fiscal years 2002, 2003, and 2004, reporting around $566m less income, and unveiling plans to " become current in its SEC reporting in as timely a fashion as possible".

The deal will be subject to regulatory approval and also includes a condition that successfully Mercury files its 2005 annual report, but HP expects the deal to close by the end of the year.

The move will also prompt further speculation about consolidation in the IT management and testing software space with BMC, CA and Compuware all long touted as potential acquisition targets for larger infrastructure vendors, such as IBM's Tivoli unit.