Pegasystems to Acquire Chordiant Software

03/17/2010

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Pegasystems to make cash tender offer at $5.00 per share; Combination expands product portfolio and increases global client base

Pegasystems Inc., (NASDAQ: PEGA), the leader in business process management (BPM) software solutions, and Chordiant Software, Inc. (NASDAQ: CHRD), a leading provider of customer relationship management (CRM) software and services, today announced they have entered into a definitive agreement for Pegasystems to acquire Chordiant.

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Under the terms of the agreement, Pegasystems will make a cash tender offer of $5.00 per share for all outstanding shares of Chordiant common stock for a total purchase price of up to approximately $161.5 million, assuming all outstanding shares are tendered. Upon satisfaction of the conditions to the tender offer and after such time as all shares tendered in the tender offer are accepted for payment, the agreement provides for the parties to effect, subject to customary conditions, a merger to be completed following the completion of the tender offer which would result in all shares not tendered in the tender offer being converted into the right to receive $5.00 per share in cash. The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close in the second calendar quarter of 2010. Chordiant reported revenue of $76.3 million and $52.3 million of cash and investments for its four quarters ended December 31, 2009. The boards of directors of both Pegasystems and Chordiant unanimously approved the definitive agreement.

Pegasystems’ commitment to innovation and customer success has resulted in ten consecutive quarters of record revenue. Its industry-leading Build for Change technology is both fueling widespread BPM adoption and being widely embraced to improve customer experience. Chordiant’s predictive decision management solutions are renowned for delivering increased customer lifetime value to their clients.

The combined company’s expanded global customer base, including many of the world’s largest organizations, can now take advantage of these complementary solutions. Chordiant clients will be able to incorporate Pegasystems intent-driven process automation to enhance customer experience in their existing foundation and marketing solutions. Pegasystems’ clients can take advantage of Chordiant’s predictive decision management solutions, extensive CRM assets, and expertise in customer experience.

Many of the leading global systems integrators, who are part of Pegasystems’ growing alliance program, have also built practices around Chordiant software. The combination of the two companies would enable an expanded partner network to enhance their practices and realize incremental growth.

“This combination creates a broader portfolio which will offer an expanded client base new capabilities to meet next-generation CRM needs,” said Alan Trefler, Founder and CEO of Pegasystems. “We are excited to add Chordiant’s technology and domain expertise to bolster our previously announced investment plans in BPM and CRM.”

“We expect this acquisition to be accretive, but under the new purchase accounting rules, transactional costs are now expensed rather than included in the calculation of goodwill,” said Craig Dynes, CFO for Pegasystems. “Accordingly, significant closing costs, integration expenses and other purchase accounting valuation charges will be dilutive to GAAP reported earnings. However, on a non GAAP basis, excluding these one-time charges and the reduction in maintenance and other revenues that are currently recorded as deferred revenue on Chordiant’s balance sheet, we expect this transaction to be accretive by as much as $0.03 to Pegasystems’ 2010 earnings per share and by as much as $0.20 to Pegasystems’ 2011 earnings per share. Pegasystems has not yet provided guidance on 2011 earnings. We anticipate providing revised guidance giving effect to these purchase accounting adjustments as the closing of this transaction approaches.”

“We are excited to bring Pegasystems’ industry-leading Build for Change technology to help our clients further optimize customer experience,” commented Steven Springsteel, Chairman, President and CEO of Chordiant Software. “We expect that our customer base will welcome this news, and can look forward to the increased innovation that Pegasystems is known for, along with the many other benefits resulting from the mutual strengths and combined scale of our companies.”