E-business infrastructure software maker Peregrine Systems Inc. has agreed to buy rival Remedy Corp. in a cash and stock deal valued at more than US$1 billion, the companies said Monday.
Peregrine said the goal of the deal is to extend the depth and scope of its product line. The acquisition will match Remedy’s base of small and mid-size customers with Peregrine’s array of global enterprise customers, Peregrine said. Additionally, Peregrine said the combination would give customers the flexibility to combine Remedy’s highly customizable applications with Peregrine’s one-size-fits-most offerings.
Peregrine said that the Remedy IT Service Management (ITSM) suite will become the company’s flagship package for small-to-midsize organizations, while its own Peregrine products will remain its primary offering for large enterprise customers. Peregrine also said it intends to combine its own infrastructure management products with Remedy’s business process authoring technology, the AR System. Peregrine said it will deliver the Action Request (AR) System 5.0 during the fourth quarter of 2001.
“By combining the Remedy AR System with our recently acquired technology from Extricity and our own Get-It studio technology, we will be able to offer a compelling and flexible industry-leading applications development environment,” Peregrine Chief Executive Officer (CEO) and Chairman Steve Gardner said in a conference call with analysts.
Growth through acquisition is a common tactic for Peregrine. In April, the company completed its acquisition of business-to-business software maker Extricity Inc. in a stock-for-stock transaction valued at $168 million. Since the start of 2000, Peregrine has made more than half a dozen acquisitions. Its purchases also include a pair of telecommunication infrastructure firms, a transportation planning software unit, and an Australian wafer fabrication facility.
Gardner emphasized the synergies between Remedy’s product line and Peregrine’s. He noted that Remedy’s products have appealed to cost-conscious companies. “Their average sales price has been significantly lower than ours as we have sold into the enterprise market, and this was something we really felt we had to fill in as we expanded,” he said.
The companies’ products also complement each other technically, according to Gardner, who said Peregrine doesn’t expect to encounter any major integration obstacles. Peregrine Director of Product Marketing David Flesh said Remedy has anecdotal evidence that around 20 companies have already been using Remedy’s AR System in conjunction with Peregrine products such as its AssetCenter management suite.
Flesh said Peregrine has no plans at this time to discontinue any Remedy products. “What we’re really looking for is ways to tie things together,” he said.
Remedy CEO Larry Garlick said during the conference call that Remedy customers have little to fear from the acquisition. Peregrine’s Gardner said development on Remedy’s ITSM suite will continue “indefinitely” as Peregrine adopts the suite as its midrange package. The company will separately develop its enterprise-aimed infrastructure management products, although the two packages “will look much more similar over time” because of shared resources and overlapping development, Gardner said.
He said Peregrine is confident that it can hold on to Remedy’s customers. Referring to the industry-wide slowdown, Gardner said, “This is a time when customers are looking to their existing vendors, and not switching vendors and adding a lot of risk.”
Details of Peregrine’s management structure after the acquisition have not yet been finalized, except that Garlick will be joining Peregrine’s board of directors, Gardner said. Peregrine has 3,000 employees to Remedy’s 1,300; while officials said there are no plans to reduce staff, Gardner said Peregrine will be picking and choosing employees to fill positions in the combined company. In April, Remedy cut seven per cent of its staff in response to slowing sales.
The deal is expected to close in late August or early September, pending regulatory and shareholder approvals. Combined, the two companies expect to generate in excess of $1 billion in annual revenues, officials said.
Shares of Peregrine (PRGN) closed down 11.5 per cent Monday on the Nasdaq exchange, at $25.51, while shares of Remedy (RMDY) soared 66.4 per cent to close at $30.52, also on the Nasdaq.
Peregrine’s buyout deal offers Remedy shareholders $9 cash and 0.9065 shares of Peregrine common stock in exchange for each share of Remedy. Based on Friday’s closing prices, the deal values Remedy shares at $35.12 each, a 91.5 per cent premium over Remedy’s $18.34 closing price at the end of trading last week.
Peregrine Systems, in San Diego, Calif., can be reached at http://www.peregrine.com/. Remedy Corp., in Mountain View, Calif., can be reached at http://www.remedy.com/.
