Rocket Software Lowers Bid for Seagull Software Slightly

Published: February 5, 2007

by Timothy Prickett Morgan

Middleware software maker Seagull Software announced last week that it has received a slightly lower offer to be acquired by Rocket Software.

Back in December, Rocket Software, which makes a bunch of mainframe tools and has extensions to Hewlett-Packard's OpenView tools that it licenses to HP, offered 4.68 euros per share to acquire the shares and outstanding stock options of Seagull Software. Just taking into account the shares listed publicly, that came out to about $55.7 million. According to a statement put out by Seagull Software, the revision came about due to "a combination of factors, including continued negotiations and due diligence."

Rocket Software and Seagull Software say that the due diligence on the deal is now completed, and Seagull Software is talking to major shareholders to discuss their willingness to tender their shares. Rocket Software has explained that it is in a position to get adequate funds to do the all-cash deal, and the two firms have outlined how the merger will proceed. With the revised deal, that works out to around $51.5 million, plus whatever the outstanding stock options are worth. Rocket Software's revised bit is essentially where the Euronext market is valuing the company. Prior to the takeover bid by Rocket Software, Seagull Software was trading for about half as much per share on the Euronext exchange.

In a related event, Seagull Software announced on January 25 that Silicon Valley Bank had boosted its revolving line of credit to $4 million, replacing a $2 million working capital credit line that Seagull Software set up with the bank in 2004. The line of credit was given to Seagull Software for general corporate purposes, and to date, the company has tapped neither the original line or the new one. But as the company says, it is nice to have financial resources if they are needed. The lines of credit may, for instance, come into play if the Rocket Software acquisition does not complete. That deal is up to Seagull Software's shareholders now. And even with the slightly revised offer, Rocket Software is offering to pay a big premium for Seagull Software.

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