British search software company Autonomy has agreed to buy fellow search technology developer Verity in a cash deal totaling around US$500 million, the companies announced Friday.
Autonomy Chief Executive Officer (CEO) Mike Lynch hailed the acquisition as a transformational deal for Autonomy that will give the combined companies a base of 16,000 customers. The deal also brings Autonomy, based in Cambridge, England, a U.S. outpost in Verity's Sunnyvale, California, headquarters.
Autonomy has gained some deep-pocketed rivals in the search market as companies such as Google and Microsoft work to expand their search offerings into enterprise-strength tools. Buying Verity increases Autonomy's scale and diversifies its revenue streams, company executives said.
Founded in 1988, Verity has been consistently profitable for the past five years. In its last fiscal year, the company had revenue of US$142.6 million and net income of US$7.5 million. Together, Autonomy and Verity would have had revenue of US$227 million over the past twelve months, according to Autonomy.
Autonomy agreed to pay US$13.50 per Verity share (ticker symbol: VRTY), a 30 percent premium on Verity's Thursday closing price of US$10.37, on the Nasdaq exchange.
Autonomy CEO Lynch will remain CEO of the expanded company, while Verity CEO Anthony Bettencourt takes over as CEO of Autonomy's U.S. subsidiary. The company's current U.S. head, Stouffer Egan, will become chief strategy officer of the expanded organization.