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Hewlett-Packard launches £6bn takeover bid for Autonomy

UK-based search software company confirms approach from US technology multinational

British software group Autonomy Corporation has received a bn (£6bn) takeover bid from technology multinational Hewlett-Packard.

The approach, which was confirmed on Thursday evening by Autonomy, would represent a 70% premium to its market capitalisation of £3.5bn. Hewlett-Packard is also reported to be planning a spin-off of its personal computer business.

In March, Léo Apotheker, HP’s chief executive, declared he would shift the business away from manufacturing hardware towards cloud computing – offering software and services over the internet. Autonomy specialises in “unstructured” search for big companies, allowing them to trawl through their own databases and seek out content from emails, phone calls and video, finding information which can be used to help detect fraud or ensure legal compliance.

Like HP, it has also moved into cloud computing. It now stores data on behalf of its clients, who include Coca-Cola, Nestlé and the US Securities and Exchange Commission. Earlier this year, the Cambridge- based company spent 0m in buying a digital archiving business from storage company Iron Mountain.

Autonomy was co-founded in 1996 by Mike Lynch, who remains in control as chief executive. Lynch has criticised London analysts, complaining that a lack of understanding of the software business has left Autonomy’s shares undervalued. He was undoubtedly rattled last summer when Deutsche bank analyst Marc Geall, a former divisional manager and then head of investor relations at Autonomy, criticised his management style.

In an extensive overview of the company, Geall wrote: “The management structure, control and systems at Autonomy are more representative of a start-up than a major global player. The senior management team is talented but lacks bandwidth. This can lead to some decision paralysis.”

The company reported full-year revenues for 2010 of 0m, up 18% on the year before, and profit before tax of 9m, up from 3m in 2009.

In a statement, the company said: “The board of Autonomy notes recent press speculation and confirms that it is in discussions with Hewlett-Packard regarding a possible offer for the company.” Lynch stands to make 0m from the deal because of his 8.2% stake in the FTSE 100 company.

Tim Daniels, an Olivetree Securities analyst, said the takeout price would have to be approaching £30 per share, which is double the current price. “We don’t think Mike Lynch would recommend a sale below top-dollar valuations, although once one move is made it would be possible that counterbidders would be [discussed].”

Autonomy’s shares were among the top 10 fallers in the FTSE 100, ending the day down 8.3% at £14.29. HP’s shares fell in afternoon trading to .13, from the previous close of .39.

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