Compuware, Viasoft Cancel Merger

Software vendors Compuware Corp. and Viasoft Inc. are to cancel their merger plans in light of a civil lawsuit filed by the U.S.

Department of Justice (DOJ) last year to prevent the move. Both companies offer products for testing and debugging mainframe software applications.

Compuware first announced its intention in July of last year to acquire Viasoft for US$167.5 million. The plan quickly attracted the attention of the DOJ, which filed a civil lawsuit in October of last year designed to halt the purchase. The DOJ determined that should the merger go ahead, it would lead to consumers being charged higher prices for the companies' respective mainframe software offerings. [See "Justice Dept. Seeks to Block Compuware Merger," Oct.

29, 1999.]

While Compuware dominates the mainframe testing and debugging markets, Viasoft is the vendor's nearest competitor, the DOJ alleged. The antitrust trial was due to kick off on April 3.

"This is a terrific result for consumers," said Joel Klein, assistant attorney general, responsible for the DOJ's antitrust division in a statement issued today. He added that if the deal had proceeded, consumers would have faced not only higher prices, but also a decrease in product support and less effort would have been expended on product development. "Our lawsuit ... will preserve competition in the affected software markets," Klein said in the DOJ statement.

In a tersely worded statement issued today, Compuware said it had been decided that it was "in the best interests of both companies to terminate the agreement, effective today." Shares of Viasoft common stock that had been tendered during the offer period will be returned to Viasoft shareholders, Compuware said.

In a letter to Viasoft shareholders posted today on the vendor's Web site, company Chairman, Chief Executive Officer and President Steven Whiteman said that his organization and Compuware had been unable to reach an "agreeable settlement" with the DOJ, hence the cancellation of the merger. He was keen to stress that despite the six months of uncertainty about Viasoft's future, the software vendor has been operating business as usual and remains "financially strong."

Compuware, based in Farmington Hills, Michigan, can be reached at +1-248-737-7300 or via the Internet at http://www.compuware.com/. Viasoft, based in Phoenix, Arizona, can be reached at +1-602-952-0050 or via the Internet at http://www.viasoft.com/.

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