Autonomy shares up after HP takeover offer

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Shares in the UK software companyAutonomyCorp. soared 76% after US tech companyHewlett-PackardCo. made a 6.21 billion ($10.25 billion) takeover bid for the data analytics specialist.

Autonomy’s board said it intends to unanimously recommend shareholders accept HP’s offer of 25.50 a share. Autonomy directors also entered “irrevocable undertakings” to accept the offer on behalf of their own holdings, representing a total of about 9.1% of the company’s share capital.

Analysts believe that, despite the “very generous offer”, a bidding war could break out.

The Cambridge-based company, which specializes in software that tracks voice calls and emails, confirmed it was in talks with HP.

“Given the premium and commitment of Autonomy’s directors we are skeptical about any counter-offer,” Socit Gnrale analyst Richard Nguyen said. “We expect a very positive market reaction on Autonomy’s share price today.”

Autonomy shares traded up 1085 pence at 2513 pence, giving the company a market capitalization of just over 6.1 billion.

While there are a few other companies that have the firepower to execute such a large deal and could step in with a counter-offer, analysts said another offer was unlikely to materialize.

“This is a friendly takeover at a generous premium and is unlikely to raise antitrust issues given the fragmentation of the enterprise search market. We believe a successful closure is highly likely, with only a minor risk of counter bidding by HP’s competitors,” Exane BNP Paribas analyst Josep Bori said.

“While we do see several large companies having the capacity to execute a large deal of this size, we do not see any of these having the strategic imperative or intention to pursue a business like Autonomy,” an analyst at Morgan Stanley opined.

STRONG INTELLECTUAL PROPERTY SETS

Gerardus Vos, an analyst at Investec, said: “We see this deal as HP playing catch-up in the ‘big-data’ arena, where we have seen a rapid consolidation by IBM, Oracle, EMC and Adobe.”

Despite the bid’s 80 per cent premium to Autonomy’s closing price, Mr Vos predicted that a counter-bid could emerge because Autonomy “has one of the strongest intellectual property sets in enterprise information management and this would be difficult to replicate for other ‘big-data’ players”.

Beyond the potential interest from IBM and Oracle, another potential bidder is SAP, which is “becoming more interested in infrastructure assets,” Mr Vos explained, saying: “We believe that any offer would need the approval of [Autonomy’s founder and chief executive] Mike Lynch, and thus cultural fit could be an issue.”

HP’s share price did not reflect the acquisition momentum as they slumped more than 20 per cent. Paul Morland, at Peel Hunt, called it a “remarkably generous offer” and said it was about three times as much as the company would have cost three years ago. “We doubt it is the answer to HP’s strategic problems, and we do not expect IBM and Microsoft to be quaking in their boots,” he added. Autonomy would be run as a separate business within HP led by Mike Lynch, who will report directly to Leo Apotheker, the head of HP.

HP announced their third quarter results this week, highlighting an increase of 1% in net revenue of $31.2 billion, up from the prior year quarter. The earnings statement also stated the offer to acquire Autonomy was to accelerate expansion in rapidly growing enterprise information management market.

The addition of Autonomy will accelerate HPs ability to deliver on its strategy to offer cloud-based solutions and software that best addresses the changing needs of businesses.

Were focused on improving performance across the business, saidLo Apotheker,HP president and chief executive officer. HP is taking bold, transformative steps to position the company as a leader in the evolving information economy. Todays announced plan will allow HP to drive the creation of a long-term shareholder value through a focus on fewer fronts, thereby improving its ability to execute, invest in innovation and drive a higher-margin business mix.

ABOUT AUTONOMY

Autonomy Corporation plc, a global leader in infrastructure software for the enterprise, spearheads the Meaning Based Computing movement. IDC recently recognized Autonomy as having the largest market share and fastest growth in the worldwide search and discovery market. Autonomy’s technology allows computers to harness the full richness of human information, forming a conceptual and contextual understanding of any piece of electronic data, including unstructured information, such as text, email, web pages, voice, or video.

Autonomy’s customer base is comprised of more than 25,000 global companies, law firms and federal agencies including:AOL, BAE Systems, BBC, Bloomberg,Ford, GlaxoSmithKline, Lloyds TSB, NASA, Nestl, and the US Securities and Exchange Commission, to name a few.

Sources: WSJ, Independent, Autonomy, Businesswire

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