Symantec to Buy Veritas for $13.5 Billion

Symantec Corp. (SYMC), a maker of security software,Thursday said it would buy storage software maker Veritas Software Corp. (VRTS) for $13.5 billion, creating the world's fourth-largest software company.

The all-stock deal values Veritas at $30.78 a share, a premium of 9.5 percent over its closing price on Wednesday on the Nasdaq stock market.

Shares of Veritas rose to $29 in pre-market trade. Shares of Symantec, known for its Norton anti-virus software (search), fell 4.6 percent to $26.12.

Combined, the companies would have annual revenue of $5 billion and would compete directly with Microsoft Corp. , which has stepped up its push into the data storage and security software markets in recent years.

The deal comes three days after another big software merger: Oracle Corp. (ORCL) clinched a deal to buy PeopleSoft Inc. for $10.3 billion.

"The new Symantec will help customers balance the need to both secure their information and make it available, thus ensuring its integrity," John Thompson, chairman and chief executive of Symantec, said in a statement.

For Symantec, whose roots lie in selling software such as antivirus protection to consumers, the purchase will expand its reach into the corporate software market and give it a sales staff trained to sell to larger companies.

Richard Williams, an analyst with Garban Institutional Equities, said the combined company will be able to satisfy most customer needs for data protection and management, giving it an edge over rivals that can provide only partial solutions.

"We like the deal, it creates a new industry," said Williams. "Symantec is taking security and stretching it, making it something new. It will force all competitors to scramble to deal with it."

Nitsan Hargil, an analyst with Friedman Billings Ramsey, said Symantec will face many integration issues in the near term but the deal should be positive going forward.

"Longer term, you will have a company that will be offering you solutions that no other can," Hargil said.

Under the deal, which has been approved by the boards of directors of both companies, Veritas shareholders will receive 1.242 Symantec shares for each Veritas share.

The combined company will operate under the Symantec name and is expected to have revenue of $5 billion for the fiscal year ending in March 2006, the companies said.

Symantec's Thompson will be chairman and CEO of the new company. Gary Bloom, chairman, CEO and president of Veritas and a former top executive at Oracle, will be vice chairman and president.

The deal is expected to result in cost savings of about $100 million, Thompson said in a telephone interview.

He said no job cuts were expected from the merger. "This is not about cost savings or cost synergies. ... We view this more as leveraging opportunities of both teams," he told Reuters.

The companies said the deal — excluding any amortization of intangibles, the write-down of Veritas' deferred revenue, restructuring charges, amortization of deferred compensation and any one-time merger costs — will add to earnings per share in the first year, compared with Thomson Financial First Call's mean estimate of 98 cents a share for Symantec in fiscal 2006.

Symantec competes with McAfee Inc. and RSA Security Inc in anti-virus software. The industry has experienced three years of rapid growth, but analysts warn that growth may slow at some point.

Veritas competes with EMC and International Business Machines in storage and data backup. The industry's growth rate is much slower than that of security software.