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OSLO - Microsoft bid US$1.2 billion ($1.6 billion) to buy Norwegian business search software company Fast Search & Transfer in a deal focused on helping corporations manage and sift through their own files, a growing market also targeted by Google.
The world's largest software maker offered
to pay a 42 per cent premium for Fast, the second-largest search provider that lets companies comb internal corporate documents, data and other information. Fast also sets up a search engine used by companies to help consumers navigate their website easier.
Fast said its board unanimously recommended that shareholders accept the Microsoft offer, which values the fully diluted equity of Fast at 6.6 billion Norwegian crowns, or about US$1.2 billion. It has been viewed by industry analysts as a takeover candidate.
"The problem businesses have around the world is they generate lots of files and they don't know where they put them," said Kim Caughey, senior equity analyst at Fort Pitt Capital, which holds about 203,000 Microsoft shares.
"Microsoft has had desktop search for a while, but it really does need a more corporate approach to tracking and storing."
In recent years, larger technology industry players such as Google Inc, IBM and Microsoft have started to move into the corporate, or enterprise, search market. This has led to flurry of acquisition activity.
Fast shares, which were suspended all day on Monday, jumped to the bid level of 19 crowns per share and then eased off slightly to 18.80 crowns. The bid price is 42 per cent higher than Fast's closing share price on Jan. 4, the last day on which it traded.
Shareholders with 37 per cent of Fast's stock, including its two biggest institutional investors - Norway's Orkla and Hermes Focus Asset Management Europe - have agreed to accept the offer, according to Microsoft and Fast.
The news pushed shares of Autonomy Corp Plc, a British rival of Fast, up 9 per cent. Microsoft shares fell 55 cents to US$34.06 on the Nasdaq.
Google, the dominant player in Web search, aims to carry over its appeal with consumers into the corporate market. Its Google Search Appliance is taking aim at niche search companies such as Fast and Britain's Autonomy Corp Plc that have been viewed as possible takeover targets.
"This industry has been consolidating for several years now," said Susan Feldman, an analyst at IDC. "Enterprise search is the missing piece in the software stack."
Feldman noted that smaller software makers that allow companies to filter, search and analyse data, documents and information are being gobbled up by large software makers such as SAP's AG move to acquire Business Objects SA.
Analysts expect Microsoft's bid to succeed.
"The bid is fair. There can always be another (rival offer), but I believe Microsoft will get it for 19 crowns a share," said analyst Erik Hjulstroem at Kaupthing Bank.
Standard & Poor's analyst Matthias Eriksson said: "I don't think there will be a competing bid. The premium is too high, so I think people will be glad to get 19 crowns."
The deal is subject to regulatory approval and acceptance from shareholders with more than 90 per cent of Fast's shares, Fast said. Microsoft expects the transaction to be completed in the second quarter of 2008.
"Enterprise search is becoming an indispensable tool to businesses of all sizes, helping people to find, use and share critical business information quickly," said Jeff Raikes, head of the Microsoft Business division.
The deal would spread Fast's search technologies more widely around the world, Fast Chief Executive John Lervik said. Fast posted a third-quarter loss of more than US$100 million on revenue of nearly US$36 million. Its clients include Dell Inc and Walt Disney Co.
Goldman Sachs is acting as financial adviser to Microsoft and Merrill Lynch is advising Fast.
- REUTERS