Autonomy to buy Zantaz for $375 mln, place shares

LONDON (Reuters) - British search software firm Autonomy Corp (AUTN.L) said on Tuesday it will buy U.S. group Zantaz Inc for about $375 million to tap the market for legal data and said second-quarter results would top forecasts.

Shares in Autonomy, which pulls together and analyses information from a range of mediums such as e-mail, video and audio, jumped as much as 10 percent in early trading.

Autonomy said it was partly funding the deal to buy Zantaz with an underwritten placing of 12.7 million new shares, expected to raise about $180 million.

Chief Executive Michael Lynch told Reuters the placing had been oversubscribed, while a separate placing to raise $100 million two months ago would also to be used to fund the deal.

Zantaz specializes in the capture and storage of vast amounts of data for legal reasons, and counts nine of the top ten global law firms among its customers.

Autonomy shares were up 8.9 percent at 793 pence by 0934 GMT, valuing the company at around 1.56 billion pounds ($3.14 billion).

Analysts at Seymour Pierce, Panmure Gordon and Numis Securities welcomed the deal, with the latter upgrading its target share price by 20 percent to 960 pence.

"We believe Zantaz is showing strong growth, at just over 20 percent per year, and combination of this and cost savings will drive significant growth in profit," Numis analysts said in a note.

Autonomy said in a statement it expected to post "record second-quarter results, with revenues and profit before tax (adjusted and IFRS) significantly ahead of consensus estimates and ahead of the top end of analysts' forecasts".

"Business has been very good," Lynch said. "There has been a rise in the use of e-mail, video and audio."

The update comes on the back of a string of new customer wins announced over the past week, which Lynch said would be typically worth about $10 million each over a period of years.

Autonomy will have around $75 million left on the balance sheet following the Zantaz deal, but Lynch said the group was unlikely to make any further acquisitions in the near future.

"We are usually averse to doing software deals -- there are not a lot of opportunities," he said, adding the integration process was often too risky.

"The risk is much lower from Zantaz as it already uses Autonomy technology," he said.

Lynch said there was "very little overlap" between the two businesses, but he had been looking at buying in Zantaz's space since law changes in the US last year made the firm more attractive.

The changes mean if a company is sued it must provide a lot more electronic-based information than previously, he said.

The acquisition is expected to generate savings of $25 million a year, to come from combining offices and merging the auditing processes.

(Additional reporting by Dan Lalor)