Sterling Software has agreed to acquire Cayenne Software for $11.4 million after Cayenne was unable to repay its bank loan and put itself up for sale.
Cayenne, which was formed out of the merger of Bachman Systems and Cadre a couple of years ago, has been struggling financially for some time. Its mid-year revenues to 30 June were down to $19.6 million from $25.1 million in the same quarter last year. Losses increased to $2 million from $1.8 million in the year ago period.
The modelling tools supplier also owed $3 million to Silicon Valley Bank, a debt it was unable to repay, and is being threatened with litigation by Esprit Systems Consulting, which alleges it owes the company $1.6 million for software training services following the extension of a contract. Cayenne is disputing the claim.
As a result, according to Cayenne?s 10-Q statement, which was filed with the US Securities and Exchange Commission on 14 August, the company "retained the firm of Adams Harkness & Hill to assist it in evaluating strategic alternatives, which include, without limitation, the sale of the company, the sale of assets, and restructuring the company to achieve a cashflow break even position and the company is actively pursuing these alternatives".
It continued: "Failure to establish a positive cash flow or successfully implement any of the strategic alternatives under consideration raises the possibility that the company will not be able to continue as a going concern."
As part of the deal and to prevent it from going under, Sterling has agreed to provide Cayenne with credit support of up to $3 million, prior to the transaction closing in October. This will be deducted from the merger consideration allocated to Cayenne?s common stockholders.
Cindy Foor, Sterling?s director of corporate communications, said: "Cayenne?s 10-Q did report that it was running dangerously low on cash, but while it has had its share of financial woes, we believe the products are valuable to us. Cayenne?s modelling tools are a natural complement to our Cool development tools and we have a lot of complementary skillsets. This afternoon, we?re starting an intensive planning phase, which will last a month, to see how the two companies will fit together."
She was unable to specify whether the acquisition would result in any redundancies or how the two product sets would fit together, but said the firm?s general model was to see how purchases could be integrated into the business rather than operating them as standalone units.
As a result, Cayenne will be slotted into Sterling?s application management group, which was formed out of the purchase of troubled Texas Instruments Software last year and which added ailing AS/400 tools supplier, Synon, to its stable a couple of months ago.
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