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Informatics Acquisition by Sterling Software: Unsolicited Offer, Takeover Attempt, and Merger
July-September 2006 (vol. 28 no. 3)
pp. 32-40
A series of events began in 1983 that eventually led to Sterling Software's 1985 acquisition of Informatics. The acquisition, unique at the time in the software industry, was preceded by an unsolicited offer and takeover attempt with a proxy fight. The transaction might well be called a "hostile takeover" although Informatics finally accepted the merger terms.

1. Richard Hill left the company in 1971. Werner Frank left the company in 1982. Frank Wagner retired from the company in 1984. The early success and growth of the company was largely due to their effective efforts.
2. The company was originally formed as a wholly owned subsidiary of DataProducts Corp. whose founder, Erwin Tomash, was prescient about the coming importance of software as a business. DataProducts spun Informatics off as a public corporation in 1968.
3. Council for Economic and Industrial Research (CEIR) was first, Computer Usage Corp. was second, and Computer Sciences Corp. was third. Of these, CEIR and CUC disappeared from the scene in a few years.
4. See M. Campbell-Kelly, From Airline Reservations to Sonic the Hedgehog, MIT Press, 2003, on the history of the software industry.
5. See W.F. Bauer, "Informatics: An Early Software Company," IEEE Annals of the History of Computing, vol. 18, no. 2, 1996, pp. 70–76, for more detail on the company's early days.
6. It will come as no surprise to the reader that I am still of that opinion.
7. A strong board of independent-minded people, board members were Erwin Tomash, founder and chairman of DataProducts Corp; Fred Carr, founder and CEO, Executive Life; William Duke, president, Whittaker Corp.; Albert Handschumaker, chairman, Aeronca Corp.; Thomas Taggart, chairman, Redcor; Vincent Marafino, CFO, Lockheed Corp.; and Dan L. McGurk, CEO, Xerox Computer Co.
8. A serious problem today in corporate governance is that the chairman-CEO has too much say in the selection of board members, and cronyism results. The problem is not easily solved.
9. Drexel Burnham Lambert was the financial institution used by Sterling Software in the acquisition.
10. Fred Carr's Executive Life fell onto hard financial times and was essentially liquidated by sale of its assets to Credit Lyonnaise.
11. Under the Securities and Exchange Commission rules of the time, and probably still the case today, any ownership exceeding 5 percent in a public company must be filed with the SEC and is reported in the company's proxy statement.
12. A more accurate, complete history of UCC can be found in many of the renderings of the history of the software industry.
13. To my friends, privately, I would refer to Sam as the "poor man's Carl Icahn."
14. I had known Sterling Williams for some years. In a crazy twist of fate, I had interviewed him for the job that was filled by Bruce Coleman, after agonizing about which individual would be better for the job.
15. My overall strategy for Informatics was to move toward business application software. The company had been steadily moving in that direction and away from research and government business for years; the Sterling merger, I believed, would not advance us in that direction.
16. I have had a strong opinion all my business life that a company cannot have two strong personalities vying for top control; one of the two must become subservient, a hard thing to do for a founder-CEO. Business is replete with examples. Consider John Reed and Sandy Weill and the merger that brought Citicorp to (now called) Citigroup, and the improbable idea that they could be "Co-CEOs." How many mergers fail to happen because of the egos of the respective CEOs?
17. At the meeting, Sam was nervous. And after a few minutes I cannot claim I was entirely calm. In the wake of all the serious discussions a funny thing happened: Sam had mistakenly picked up my partially eaten piece of toast. Sam, the bread plates are on the left.
18. The main purpose of a banker's opinion is to provide cover for the board in their refusal of the offer.
19. Clarence Spangle was nominated to take the place of Thomas Taggart. Spangle's last job was chairman, Memorex. He was elected at the 1985 shareholders meeting when Sterling lost the proxy battle for the two seats.
20. All submissions to shareholders such as proxy material must be submitted to and approved by the SEC. Normally, the SEC responds in detail and the final wording of the documents is worked out. Also, at least as a courtesy, proxy materials were sent to the New York Stock Exchange where Informatics was listed. The record is replete with extensive back-and-forth comment about the content of these media and direct missives to the shareholders.
21. Informatics became a contribution to the long list of corporate names and entities that no longer exist in the software industry: Sterling, Management Sciences of America, Lotus, Cullinet, Software AG, Cincom, Pansophic, Applied Data Research, Tymshare, Visicorp, and Uccel all substantial players in software in the 1970s and 1980s.

Index Terms:
Informatics, Informatics General Corporation, Sterling Software, Sam Wyly, Sterling Williams, unsolicited offer, takeover, acquisition, software history, software companies
Citation:
Walter F. Bauer, "Informatics Acquisition by Sterling Software: Unsolicited Offer, Takeover Attempt, and Merger," IEEE Annals of the History of Computing, vol. 28, no. 3, pp. 32-40, July-Sept. 2006, doi:10.1109/MAHC.2006.51
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