5 August 2003 Ascential Software — better known to many as the non-database rump of Informix Software — has agreed to buy troubled data integration software company Mercator for $106 million in cash. The deal is the latest in a series of big mergers in the rapidly consolidating software industry.
The merger will create a specialist integration and analysis tools company with annual sales of about $250 million and some 3,000 customers.
Few observers will be surprised by the move, given Mercator’s troubled history in the past year and Ascential’s cash pile. According to recent filings, Ascential has some $600 million in cash and short-term receivables, mostly resulting from the sale of the Informix database business to IBM in April 2001.
Ascential, which specialises in software for analysing data held in large and disparate databases, has sales of about 140 million. Its business is largely based on software from an earlier acquisition by predecessor company Informix, of Ardent Software.
In April 2003, Mercator fought off a $74 million hostile takeover bid from a group of disaffected shareholders, led by Rodney Bienvenu, the ex-CEO of portal software vendor SageMaker. He claimed that Mercator’s management had put the company in a “precarious situation” and made it “increasingly irrelevant in the marketplace”. Although the bid failed, many analysts believed it put Mercator ‘in play’ — especially as new licence sales slumped due to the uncertainty.
Mercator is best known for its mapping and workflow tools at the higher end of the enterprise application integration (EAI) stack. But web services technology and consolidation is affecting all the suppliers in this area and in spite of some bold moves to embrace and use web services, few expected Mercator to remain independent. At the same time as it announced the takeover, the company unveiled second quarter revenue down 18% to $22 million, with net losses of $9.2 million.
In spite of its target’s shrinking sales and losses, Ascential said it expects the Mercator acquisition to add to earnings in the first year and that the company will be firmly established as the leader in the high-end application integration market.