BOSTON — IBM Corp. took another step to build out its software portfolio Thursday by announcing a $1.6 billion acquisition of FileNet Corp., a maker of software that helps companies route data through business applications.
The all-cash deal values FileNet at $35 a share, a slim premium to FileNet's $34.65 closing price on the Nasdaq Stock Market on Wednesday. If shareholders approve, the deal would close in the fourth quarter.
FileNet shares rose $1.52, or 4.4 percent, to close at $36.17 on the Nasdaq, as investors apparently bet that IBM may raise its price above $35 or another bidder might emerge. FileNet CEO Lee Roberts defended the bid's price in part by noting that the all-cash nature of this deal shielded FileNet shareholders from market risks inherent in stock transactions.
IBM executives would not comment on whether the company would consider raising its price.
IBM's software division, the most profitable unit of the Armonk, N.Y., company, has been boosted by 38 acquisitions since 2001 as IBM has sought to become an all-purpose manager of "information on demand" for its customers.
This would be IBM's fourth-largest acquisition of any kind and the latest in a recent string. On Aug. 3, IBM agreed to spend $740 million in cash for MRO Software Inc., which lets industrial companies track their physical assets. The previous day IBM said it had bought privately held Webify Solutions Inc. for an undisclosed amount.
FileNet, based in Costa Mesa, Calif., was founded in 1982 and says three-fourths of the Fortune 100 have been its customers. With 1,800 employees and $422 million in 2005 revenue, FileNet has a key presence in the "enterprise content management" market, which analyst firm IDC expects to grow more than 10 percent annually over the next five years. Key competitors include Oracle Corp. and EMC Corp.
IBM plans to combine FileNet's operations, employees and executive team with its own content management group. Analyst Jim Murphy of AMR Research said IBM and FileNet had significant technological overlap, so the main benefit to Big Blue was the ability to grab FileNet's customers in insurance, banking, government and telecommunications.
FileNet stock had zoomed to 52-week highs in the past week. FileNet had been rumored to be an acquisition target, though Roberts also had recently suggested the company was considering making acquisitions of its own to strengthen its competitive position.
IBM shares rose 35 cents to finish at $75.74 on the New York Stock Exchange.