HP buys software maker Mercury

Hewlett-Packard (HP), the world's second-biggest personal-computer maker, agreed to buy software maker Mercury Interactive for about $4.5 billion.

Mercury shareholders will receive about $52 a share in a cash tender offer, HP said Tuesday. The offer is a 33 percent premium to Mercury's closing price.

The purchase is HP's biggest since buying Compaq for $18.9 billion in 2002. Chief Executive Officer Mark Hurd is snapping up Mercury while it is embroiled in regulatory probes over its granting of options to top executives, three of whom left the company. Hurd is seeking Mercury's products that help companies better use their software.

"HP has been a long time in the software business but has been much more aggressive about acquisitions in the past year," said Brent Bracelin, an analyst at Pacific Crest Securities in Portland, who rates the shares "sector perform" and said he doesn't own them. "Mercury has some interesting technology that ties into HP's systems-management realm."

Mercury shares jumped 31 percent to $51 in extended over-the-counter trading. The stock is up 40 percent this year, in part on expectations the options scandal may make the company a takeover target. HP shares had risen 26 cents to $31.33 in regular trading.

The transaction will take HP's software business to more than $2 billion in revenue, the company said in the statement. HP's software unit has been profitable for three straight quarters. The business made a profit of $3 million in the most recent quarter ended April 30.

"We've been thinking about this for a while," Hurd said on a conference call with analysts. "We didn't do this lightly."

Mercury, which restated profit because of the option grants, will generate a 24 percent rise in revenue to about $204.9 million in the quarter ending in September, based on the average estimate of 22 analysts surveyed by Thomson Financial.

The company's software measures the effectiveness of companies' software and technology, according to its Web site. Mercury, founded in 1989, counts Dell, The Gap and Motorola among its customers.

"This transaction demonstrates that HP is building a software business to be reckoned with," Hurd said on a call with reporters.