BMC Software, facing heat from Hewlett Packard's Opsware in the battle for data center supremacy, announced Monday that it is buying Bladelogic for $28 per share in a deal worth about $800 million.
News of the deal sent BMC shares down $1.95, or 5.8 percent, to $31.83, in early afternoon trading while BladeLogic climbed $3.69, or 15.7 percent, to $27.30.
The deal represent's BMC effort to "leapfrog HP and its portfolio of Opsware products," said Richard Sherman, an analyst at MKM Partners based in Greenwich, Connecticut. Hewlett Packard paid $1.6 billion to acquire data-center automation firm Opsware in July 2007.
Companies like BladeLogic and Opsware work to automate corporate data centers and keep a lid on their costs.
In a conference call, Bob Beauchamp, president and chief executive of Houston-based BMC, said the company will make a tender offer, expected to begin within 10 days, to BladeLogic shareholders. If approved, the deal is expected to dilute earnings in fiscal 2009, but add to them in fiscal 2010.
Mr. Sherman said BMC sales channel partners and customers had been clamoring for such a deal that delivers "leading technology" in data center automation.
"It's something customers and channel partners want and need," he said, noting an acceleration in BladeLogic's "win rate" for corporate data center contracts over the last three to six months.
Still, the technology comes at a price.
Mr. Sherman estimates that BMC is paying eight times forward revenue for BladeLogic, which could alienate part of the company's institutional shareholder base of value investors, who rely on dependable growth and cost containment.
BMC's largest institutional holders include money managers like Dodge & Cox, J&W Seligman & Co. and Hotchkis and Wiley Capital Management.
"When they see valuations like this, they tend to be concerned," he said.
In 2007, BMC pursued several bite-size acquisitions, including: Emprisa (October), RealOps (July) and ProactiveNet (June). In 2002, BMC snatched the Remedy software unit for $350 million cash, plus assumption of liabilities, after Remedy's parent, Peregrine Systems, had filed for bankruptcy protection.
On Monday, HP announced a new data center initiative that offer companies virtualization services to help firms get more out of their hardware and hosted data center services and to let firms outsource their data center needs.