Rockville-based Sage Software Inc. said yesterday it has signed an agreement to merge with Index Technology Corp. of Cambridge, Mass., in a deal valued between $50 million and $55 million.
Both Sage and Index design computer-aided software engineering -- or CASE tools -- which automate the software development process so that it does not have to be written out by hand.
Analysts praised the pending merger yesterday, saying the CASE tool market is overcrowded by manufacturers because the niche has not grown as fast as makers anticipated.
"Using automation for software is needed, but it is being met with resistance," said Arnhold & S Bleichroeder analyst Sewall Hodges. "Software programmers are like novelists, and they consider it a work of art. They don't like to be pigeonholed into a pre-written work."
Sage and Index closed unchanged in over-the-counter trading yesterday at $9.50 and $8.50, respectively.
Upon consummation of the merger -- which must be approved by stockholders at both companies -- 1.059 shares of Sage common stock will be issued to the stockholders of Index for each outstanding share of Index common stock.
Based on the current capitalization of both companies, the current stockholders of Sage will own approximately 55 percent, and the current stockholders of Index will own approximately 45 percent of the total outstanding common stock of the combined company after the merger.
The combination of the two companies will bring Sage's application generation products under the same roof with Index's design and analysis products, giving a one-stop shop approach to the firm's clients -- corporations that use CASE tools for internal software use.
"Our customers were asking for a complete software solution from one vendor," said Kevin J. Burns, Sage's chief executive officer.
On a combined basis, the company will have approximately 10,000 customers with approximately 100,000 users, Mr. Burns said. After the merger, the name of the new corporation will be changed, and Mr. Burns will be the chairman of the board and chief executive officer. Richard A. Carpenter, Index chief executive, will be vice chairman and chief, strategy and product architecture.
Mr. Burns said he is not sure whether the company will have its headquarters in Rockville, although the surviving legal entity will be Sage.