Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, June 12, 1995 TAG: 9506120104
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: Associated Press
DATELINE: NEW YORK LENGTH: Medium
The deal, valued at $3.52 billion, is the software industry's largest merger.
The companies announced the agreement Sunday afternoon, turning IBM's first hostile takeover bid into a friendly one.
``Our intention is to move as quickly as we possibly can to start bringing the value of this combination to the marketplace,'' Lotus chief executive Jim Manzi told reporters in a telephone conference.
The deal has the potential to reorder the personal computer software industry by putting IBM in a strong position to challenge Microsoft Corp., which has come to lead the industry through its dominance in operating system programs that run the basic functions of a PC.
``Lotus will be a very critical and important part of IBM and IBM's growth strategy,'' IBM chief executive Louis Gerstner Jr. said.
The buyout began as a hostile offer, announced publicly last Monday just moments after Lotus was informed. Lotus executives had rejected offers from IBM during five months of private talks on a variety of business relationships.
IBM's initial cash offer of $60 per share was twice Lotus' market value at the time. Lotus stock rose $28.94 to $61.44 on June 5 when IBM announced its offer. It closed at $62.871/2 Friday on the Nasdaq Stock Market.
Gerstner and Manzi met for dinner Tuesday and then brought together their investment bankers and legal advisers to begin negotiating a friendly buyout.
Manzi will become a senior vice president of IBM, continuing to lead Lotus, which will retain its name. Gerstner said he was ``really delighted'' the deal came together so quickly and that Manzi had agreed to stay.
Manzi's role is key to ensuring a smooth transition. Hostile takeovers are rare in the software business because the most important asset of such firms are programmers, who can leave if they don't like the acquiring firm. Financial terms are usually arrived at with management before a buyout is announced.
The key attraction for IBM at Lotus is a product called Lotus Notes, a conferencing, database and e-mail ``environment'' that customers can customize for themselves.
The product has changed the way some businesses organize themselves and is used by a growing number of IBM's largest customers, including General Motors Corp. and US West Inc.
In one sign of the product's importance, its chief developer, Raymond Ozzie, became involved in the IBM buyout talks and even met Gerstner, Manzi said.
With IBM's backing, Lotus will have a chance to bolster Notes at a time when the product is leading the market but has seen its growth stall.
Rival products by Collabra Software Inc. and ICL-Teamware don't have all the features that Notes does, and Microsoft and Novell Inc. are still months, perhaps a year, away from bringing their offerings to market.
``We've got a global marketing force in 140 countries around the world and we want to put that marketing force behind Notes,'' Gerstner said June 5.
While there was speculation that other companies - such as AT&T Corp. or Oracle Corp. - may have an interest in Lotus, none immediately countered IBM's offer and, as time wore on, it became clear that none would.
by CNB