Rational to Buy Pure Atria; Stocks Plummet

Rational Software Corp., expanding its expertise in offering software-programming products, said it agreed to buy rival Pure Atria Corp. in a stock deal initially valued at about $839 million. Both companies’ stocks plunged, however, after Sunnyvale-based Pure Atria said its first-quarter earnings would be far less than Wall Street had expected because of difficulties the company has had managing its own acquisitions. Under terms of the acquisition, Santa Clara-based Rational would pay 0.9 share for each of Pure Atria’s 39.92 million shares outstanding. Based on Rational’s Friday closing stock price of $23.375, the transaction would be worth $839 million. Monday’s stock slide slashed the deal’s value by 42%, to about $489 million. Rational Software’s stock fell $9.75, or 42%, to close at $13.625, while Pure Atria’s stock fell $7.75, or 44% to $10. Both were among the most active issues on Nasdaq and were the biggest percentage losers in U.S. trading.(Reuters)