Autonomy buys US software group for $775m

Autonomy buys US software group for $775m
By Philip Stafford

Published: January 22 2009 15:10 | Last updated: January 22 2009 15:10

Autonomy, the search software company, hopes to make further inroads into the compliance and regulation market with the US acquisition of Interwoven for $775m (£558m) cash.

The Cambridge-based company has ridden a wave of corporate demand for compliance-related software in the past year following changes to regulations on the storage of electronic data and fears among financial institutions of litigation in the wake of the credit crisis.

Autonomy will offer $16.20 a share for Interwoven - a premium of 36 per cent to the US group’s share price before the offer.

Autonomy will pay for the deal partly through its own $200m cash reserves, a new revolving credit facility provided by Barclays and a £220m share placing.

David Toms, an analyst at Numis Securities, said that Interwoven gave Autonomy access to corporate content management systems and a potential repository of unstructured electronic information, such as documents, e-mails, phone conversations and multimedia.

”Interwoven’s particular footprint in the legal industry plays to Autonomy’s current ’regulatory’ enthusiasm,” he said.

The deal is expected to enhance earnings in 2009 by 20 per cent.

The placing, priced at £10.33, was five times subscribed and completed in just 60 minutes, traders said.

Citi, Deutsche Bank and Morgan Stanley were the joint co-ordinators of the placing.

Autonomy shares closed 39p higher at £10.72.

FT Comment

Mike Lynch, chief executive, likened Autonomy’s core IDOL software to a jet engine - sticking it on to the body of an aircraft creates something useful. Previous acquisitions such as Verity for $500m in 2005 and Zantaz for $375m in 2007 gave Autonomy aeroplanes on to which it could bolt its jet engine, and the Interwoven deal follows that pattern. Potentially, the deal catapults Autonomy into a broader market. As electronic information becomes ever more scattered and haphazard, organised storage of it becomes more difficult. The ability to search for relevant bits quickly for compliance reasons becomes paramount. Autonomy has a record of successful integration of acquisitions and the price of 2 times revenues is no more expensive than similar deals in the sector. The difficulty might lie in Interwoven’s lower margins but Autonomy overcame similar issues with Zantaz. Earlier this week Autonomy hailed 2008 as ”a record year”. There have been concerns whether momentum could be sustained but it is now likely to continue into 2010.

Copyright The Financial Times Limited 2009