Rally Software, the Boulder, CO-based software company that led a new generation of technology startups in Colorado and became the first in years to reach an IPO, is going to be acquired by CA Technologies.
CA (NASDAQ: [[ticker:CA]]) announced Wednesday that it had signed a definitive agreement with Rally (NYSE: [[ticker:RALY]]) to buy the company for $19.50 per share, or about $480 million net of cash acquired. That’s 44 percent more than the $13.51 per-share price Rally’s stock traded at when the market closed on Wednesday.
The announcement sent Rally shares soaring, opening the day at $19.42 per share, an increase of 43 percent.
Rally makes software that developers use to write applications and manage projects using “agile” programming methods. Advocates believe agile development leads to better software that’s written in less time, and CA said in its release that acquiring Rally allows it to offer new products (and complement existing ones) to software developers using DevOps and the cloud.
“In order to compete, businesses need to develop high quality software quickly and reliably,” CA chief executive Mike Gregoire said. “At the end of the day, this deal is about enabling speed and flexibility, about how we can make the most demanding enterprises truly agile.”
While analysts focused on issues such as how the deal will allow CA to better compete with IBM and Microsoft in a portion of the market that’s expected to grow to $1.1 billion by 2017, the local impact is still being sorted out. The company has about 500 employees worldwide, with about 280 at its Boulder headquarters and Denver office. Rally’s sales hit $88 million in its 2015 fiscal year.
Rally CEO Tim Miller told employees in an e-mail that Rally was seeing double-digit growth and making progress despite some ups and downs following its IPO. But it couldn’t turn down joining CA, with the latter company’s market cap of $13.6 billion and $4.26 billion in revenue in its past fiscal year.
“With the support and resources post-close from CA—one of the largest software companies in the world—we will be able to accelerate our mission of driving Business Agility for enterprise companies at a scale and speed that we’re not currently able to support,” Miller wrote. “This acquisition will put Rally on a much bigger stage, in a place where we will be enabled to capture this opportunity with the addition of the global resources, brand, and access to enterprise customers that a company like CA brings.”
Rally’s headquarters is expected to remain in Boulder, and Miller said its executives will remain with CA after the deal closes in the third quarter. Whether Rally will keep its name and branding and be bundled with CA products remains to be determined, CA said in a separate FAQ it sent to Rally’s employees.
Rally has been a trendsetter in Colorado’s tech world since it was founded in 2002. Not only was it one of the first successful software startups to emerge in Boulder during the 2000s, the company also was influential in establishing Boulder’s startup community. Its founders and executives helped form organizations such as the Entrepreneurs Foundation of Colorado.
A high point for Rally was its $84 million IPO in April 2013. It was the first time in years a Colorado software company made it to the public market.
Early on, Rally’s IPO was viewed as a success for investors, with its stock trading at more than $32 a share in September 2013. But that high didn’t last as the company’s stock steadily fell, bottoming out at $8.24 last December. Investors and analysts soured on Rally, citing weak earnings growth.
