Computer Associates to buy Cheyenne Software $1.2 billion purchase is the latest in a flurry for software heavyweight


NEW YORK -- Computer Associates International Inc., one of the world's largest software companies, continued its buying spree yesterday with a $1.2 billion cash bid for Cheyenne Software Inc., a maker of mass storage software for business computers.

Computer Associates, a $3.5 billion company based in Islandia, N.Y., offered $30.50 for each of Cheyenne's 38.9 million shares. The deal is subject to both shareholder and regulatory approval, although both companies' boards have already approved the merger, and investors appeared happy as well.

Computer Associates' stock rose $1.75, to $64.50, on the New York Stock Exchange, while Cheyenne surged $7.23, to $30.26, on the American Stock Exchange.

Cheyenne, with $250 million in revenue last year, sells software that large corporations use to manage data stored on computer networks, specializing in products for Microsoft Corp.'s fast-selling Windows NT software for corporations. The company had also recently entered the growing market for antivirus software.

Computer Associates, with 9,000 employees worldwide, is leading supplier of software for managing enterprise-wide computer systems. Analysts speculated that Computer Associates was seeking to broaden its position in the market for Windows NT software and gain better distribution within companies installing smaller computer networks.

Charles Wang, chairman and chief executive of Computer Associates, described the two companies' product lines as "synergistic," and added that Cheyenne received 95 percent of its revenue through indirect sales, while the majority of Computer Associates' sales were direct to customers. The merger would enable Computer Associates to receive half its revenues eventually through indirect sales, Wang said.

Conveniently, both companies are based on Long Island. Wang said Computer Associates would retain all of Cheyenne's 800 employees and maintain Cheyenne's headquarters in Roslyn Heights.

"It's really a very good fit," said Melissa Eisenstat, a software analyst with Oppenheimer & Company in New York. "I look at storage management, which is the business that Cheyenne is in, as a subset of the business that Computer Associates is in -- systems management."

For Computer Associates, the acquisition is the latest in a flurry of corporate purchases, following its $1.8 billion deal to buy a rival software maker, the Legent Corp., in August 1995 and the ASK Group Inc. in June 1994. The merger of Computer Associates and Cheyenne is the third-largest in software history, trailing only Computer Associates' acquisition of Legent and the IBM Corp.'s $3 billion purchase of the Lotus Development Corp. last year.

The deal comes just a few months after McAfee Associates Inc., the nation's largest supplier of antivirus software, attempted to acquire Cheyenne for $27.50 a share. Cheyenne's board unanimously rejected the offer, calling it a ploy to take advantage of a short-term drop in Cheyenne's stock price. That merger would have created the world's fifth-largest software company.

Pub Date: 10/08/96

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