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Wachovia sees IBM purchase of Rational Software affecting BEA Systems, Mercury Interactive
By Ronda Fears
Nashville, Dec. 6 - Rational Software Corp.'s acquisition by IBM Corp. for about $2.1 billion is a positive for that company but is also likely to impact Mercury Interactive Corp. and BEA Systems Inc., said Wachovia Securities convertible analysts.
"We believe this is a good deal for both parties. IBM has been strengthening its software practice over the past 12-18 months, acquiring six companies before Rational. This transaction will enable IBM to further pull away from its competitors," said analysts Henry Voskoboynik and Brian Park in a report Friday.
"We believe BEA Systems (IBM is the competitor) and Mercury Interactive (IBM is a 5%+ customer) are likely to be the two companies most affected by this transaction."
Rational Software's 5% convertible due 2007 soared 15.25 points on the news to 101.375 bid, 101.625 asked. The stock also made a run, closing up $2.12 to $10.29.
IBM is paying $10.50 a share for Rational Software.
BEA Systems' 4% convertible due 2006 (B) was quoted down 0.625 point to 86.75 bid, 87.75 asked at one shop (not Wachovia). At another shop, it was quoted down 3.375 points to 84 bid, 84.75 asked. The shares closed off 8c to $9.89.
Mercury Interactive's 4.75% convertible due 2007 was quoted down 1.25 points to 87.125 bid, 90.125 asked at one shop but up 2.625 points to 89.75 bid, 90.25 asked at another. The stock closed down 53c to $30.02.
The Wachovia analysts said IBM and Rational Software expect significant synergies through the merger. They noted the two companies have been working together since 1988, and that IBM is one of Rational Software's largest customers.
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