ArcSight investors will receive $43.50 a share in cash, Palo Alto, California-based HP said today in a statement. That’s 24 percent more than the stock’s Sept. 10 closing price.
The deal follows purchases by HP in areas such as services, networking equipment and smartphones, lessening its dependence on lower-margin computers and servers. ArcSight, a maker of software used to identify suspicious activity on a corporate network, may help HP better incorporate security features into other products.
“HP wants to expand from their traditional hardware offerings -- printers and computers and servers -- and they’ve gone into more services and software,” said Dave Novosel, an analyst at corporate-bond research firm Gimme Credit in Chicago. “This is something that’s a little bit different for HP. This is not where they’ve had a strength in the past.”
ArcSight rose $8.81, or 25 percent, to $43.91 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have climbed 72 percent this year, with much of the gain coming since the beginning of August, amid talk ArcSight might be a takeover target. HP, down 26 percent this year, rose 8 cents to $38.28 on the New York Stock Exchange.
ArcSight will pay HP a fee of $61 million in the event it terminates the deal to accept a superior offer, ArcSight said today in a regulatory filing.
HP’s interim Chief Executive Officer Cathie Lesjak agreed on Sept. 2 to pay $2.35 billion for storage-system maker 3Par Inc., winning a bidding war with Dell Inc. by offering more than three times 3Par’s closing stock price on Aug. 13, before Dell’s interest was made public. Goldman Sachs Group Inc. represented HP in the deal.
The ArcSight acquisition will help HP serve the data-center market, a linchpin of its growth strategy, said Aaron Rakers, an analyst at Stifel Nicolaus & Co. in St. Louis. Security software could assist customers in managing the centers, which consist of large rooms of servers that handle corporate tasks, he said. The company is trying to turn its leadership in PCs into a bigger role in corporate computing.
Intel Corp. agreed last month to pay $7.68 billion for McAfee Inc., a provider of programs that protect computers from viruses and malware. The chipmaker paid a 60 percent premium, underscoring the growing importance of computer security and fueling speculation that related deals may be in the works.
Based in Cupertino, California, ArcSight also specializes in programs that help companies and government agencies meet compliance requirements for their computer systems. It has more than 1,000 customers, such as the U.S. Federal Reserve and Verizon Communications Inc., according to its website.
Net income at ArcSight almost tripled to $28.4 million in the fiscal year that ended in April. Sales increased 33 percent to $181.4 million in the period.
The 24 percent premium HP is paying for ArcSight is less than the 38 percent average premium in more than 40 acquisitions of U.S. computer-security firms in the past 10 years. Even so, the offer represents about 7.6 times ArcSight’s revenue in the 12 months through July, higher than the 3.4 median of six deals since 2000.
Former HP CEO Mark Hurd left Aug. 6 after the company said he violated standards of business conduct. An investigation found inaccurate expense reports filed in his name that had the effect of concealing a personal relationship with an HP contractor. He has since been hired as a president of Oracle Corp., reporting to that company’s CEO, Larry Ellison.
Search for Successor
HP has hired the firm Spencer Stuart to help it find a permanent successor for Hurd. Lesjak, who serves as chief financial officer, has said she doesn’t want to replace Hurd permanently.
“It’s interesting that even without Mark Hurd or his replacement that they have been so aggressive,” Paul Meeks, an analyst at Capstone Investments Inc., said in an interview with Bloomberg Television today. “If I was in their shoes, I might have slowed the pace of acquisitions or at least waited for the permanent replacement to come in.”