Filing reveals that Cognos went to IBM first

Cognos SEC filing reveals that BI vendor approached IBM first.

Cognos executives first approached IBM in the months leading up to IBM's pending US$5 billion deal to buy the company, not the other way around, according to a document Cognos submitted Friday to the U.S. Securities and Exchange Commission.

The filing was prepared for Cognos shareholders in advance of the Jan. 14 vote on the sale.

The details it provides of the negotiations between IBM and the company stand in contrast to past statements made by Rob Ashe, the Canadian business-intelligence software maker's CEO, who at one time stressed the company's game plan was to become the top independent BI vendor in the market.

But clearly, those ambitions weakened as the space saw a dramatic consolidation in 2007, with SAP AG scooping up Business Objects and Oracle buying Hyperion.

In fact, Cognos talked with potential suitors as far back as the middle of last year, according to the filing. The vendor said a firm it identified only as "Company X" approached it about a possible acquisition on July 19, 2006, but those discussions eventually broke down, according to the filing, which does not reveal Company X's price-per-share offer.

Negotiations ceased on Nov. 20, 2006, and Cognos subsequently reached out to IBM in December 2006 to gauge its interest, according to the filing. "While our board of directors had not determined that a sale of Cognos was the most desirable outcome, it believed that IBM's interest was of relevance in considering any strategic alternative in the event that Company X or other potential acquirers approached us," it states.

Company X attempted to restart talks with Cognos on Dec. 6 but refused to raise its offer, according to the filing.

Ashe then met on Jan. 8 with Ambuj Goyal, general manager of IBM's information management division, and Steve Mills, senior vice president and group executive, IBM Software Group.

Cognos entered a confidentiality agreement with IBM on Jan. 31, and executives from the two companies met a second time on Feb. 2.

Talks continued throughout the year, but revolved around partnership opportunities until Sept. 21, when Goyal and David Johnson, IBM's vice president of corporate development, called Ashe "on an unsolicited basis, and expressed IBM's interest in acquiring Cognos," the filing states.

The two firms spent the next several weeks haggling over a price for Cognos. IBM's initial offer was US$50 to US$52 per common share in cash, but Cognos deemed it insufficient, according to the filing

Following a series of back-and-forth negotiations, IBM raised its price to US$57. Cognos did not accept, but said it would proceed based on a $58-per-share offer, the filing states.

IBM agreed, and the firms eventually signed the deal on Nov. 11.

A Cognos spokeswoman said Monday that the company would not comment on the filing.

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