Autonomy Corporation announces agreement to acquire ZANTAZ

Autonomy Corporation (LSE: AU. or AU.L), a global leader in infrastructure software for the enterprise, today announced an agreement to acquire ZANTAZ, a global leader in content archiving and electronic discovery solutions and software as a service.

The combination of the two companies will redefine information risk management by proactively automating the full spectrum of consolidated archiving, e-discovery, analytics and real-time policy management uniquely in one system.

Customers' information will simultaneously be available in operational systems and consolidated archives, allowing rapid e-discovery and analytics to be run seamlessly across all information sources using advanced methods such as conceptual search, clustering and alerting.

* Purchase price of approximately $375 million in cash after certain deductions, funded by an underwritten placing, a term loan and a portion of Autonomy's cash reserves.
* ZANTAZ customers include nine of the top 10 global law firms, 11 of the Fortune 25 and 14 of the top 20 Financial Securities firms.
* Customers will benefit from a powerful combination of technology leadership and customer-facing strengths in sales, support and professional services.
* Transaction will add significant scale to Autonomy's revenue and profitability.
* Expected to be accretive to earnings in the first six months.
* Expected costs synergies of approximately $25 million per annum. (Brought forward tax losses will be assumed with a net present value of approximately $45 million.)
* Post-closing, Autonomy expects to have a cash balance of at least $75 million.
* Steve King, CEO of ZANTAZ, will retain his position as CEO of the ZANTAZ division of the Autonomy group.
* Transaction is expected to complete by August 2007 and is subject to regulatory approvals and other customary closing conditions. Irrevocable commitment to vote in favour of the transaction delivered from sufficient shareholders.
* The acquisition exploits Autonomy's skills and strong track-record in integrating businesses, evidenced by the London Stock Exchange's "2006 Achievement of the Year Award" for the success of the Verity acquisition.

Commenting on the transaction, Dr Michael Lynch, group CEO of Autonomy said: "The combination of Autonomy and ZANTAZ, market leaders in enterprise search and content archival respectively, expands the addressable market, distribution and reach for Autonomy's highly-successful Aungate IDOL-based products.

"Aungate has proven itself particularly strong in light of recent regulatory changes, such as the revised Federal Rules of Civil Procedure governing lawsuits in the US, and we believe this acquisition will greatly speed the adoption of this next generation of real-time technology into the market. Additionally, our distribution for Aungate is now increased through an on-demand, software as a service model and a larger sales organisation with deep legal and compliance domain expertise, while Autonomy will greatly increase the international distribution for ZANTAZ' products.

"We have been greatly impressed by ZANTAZ' products and will be continuing to develop and support the whole range. Our combined solution will be unique in offering our existing 17 000 customers end-to-end information-rich risk management solutions - from hosted archiving to e-discovery, compliance, real-time governance and archive analytics - in one consolidated platform, including information from documents to applications and voice and video."

"Companies are rapidly recognising the importance of being able to proactively retain, classify and quickly extract meaningful evidence from terabytes of e-mail, documents, spreadsheets, audio, video and other unstructured data for compliance and litigation purposes," said King.

"Together with Autonomy, we will deliver an unprecedented opportunity for customers - including 14 of the top 20 securities firms and nine of the top 10 global law firms - to gain competitive advantage and streamline the management and control of these key business processes, eliminating multi-vendor solutions and redundant resources and significantly reducing cost and risk. We are extremely excited with the unique possibilities for future product direction that will arise through the integration with Autonomy's IDOL technology."

Under the terms of the acquisition agreement, Autonomy Corporation will acquire all outstanding securities of ZANTAZ.

The transaction is conditional upon, inter alia: (i) approval by ZANTAZ shareholders (with sufficient irrevocable commitments to approve the transaction already delivered); and (ii) regulatory approvals, including antitrust approvals.

The terms of the transaction have been unanimously approved by the Boards of Directors of both companies. ZANTAZ has agreed to pay a break-up fee to Autonomy of $10 million payable under the acquisition agreement upon certain termination events. Following completion of the transaction, ZANTAZ will become a wholly-owned subsidiary of Autonomy and will be led by current ZANTAZ CEO Steve King.

Based on ZANTAZ' audited accounts for the year ended 31 December 2006, the value of the gross assets - the subject of the transaction are $119 million, and the EBITDA and profits attributable to the assets the subject of the transaction are $5.2 million (or $6.6 million, excluding certain one-time charges) and $10.1 million, respectively.

ZANTAZ' revenue for the year ended 31 December 2006, for the go-forward operational units was approximately $100 million. The consideration will be funded through the proceeds of an expedited underwritten placing of Autonomy ordinary shares to financial institutions, a term loan under a $98 million bank debt facility and Autonomy's existing cash reserves.

A presentation for analysts and institutions will be held at 9:30am. BST on 3 July 2007 at the offices of Financial Dynamics, Holborn Gate, Southampton Buildings, London WC2A 1PB. The presentation will also be available live at www.autonomy.com on 3 July 2007, at 9:30 a.m. BST. Please call Financial Dynamics on +44 207 831 3113 for Web cast details. This announcement does not constitute, or form part of, an offer to sell, or the solicitation of an offer to subscribe for or buy any securities to be issued or sold in connection with the transactions described herein.

This announcement does not constitute, or form part of, an offer to sell or the solicitation of an offer to subscribe for or buy any securities, nor the solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issue or transfer of the securities referred to in this announcement in any jurisdiction in contravention of applicable law.

This announcement is not an offer of securities for sale in or into the United States or any jurisdiction in which such an offer or solicitation is unlawful. Any securities issued in connection with the acquisition have not been and will not be registered under the US Securities Act of 1933, as amended (the "US Securities Act") and may not be offered, sold, taken up or renounced in the United States absent registration under the US Securities Act or an applicable exemption from such registration. There will be no public offering of securities in the United States. The shares have not been and will not be registered with any regulatory authority of any state within the United States.

Certain statements made in this announcement are forward-looking statements. These forward-looking statements are not historical facts but rather are based on the company's current expectations, estimates and projections about its industry, its beliefs and assumptions. Words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors, some of which are beyond the company's control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. These factors include, among others, the ability to consummate the transaction; the ability of Autonomy to successfully integrate ZANTAZ' operations and employees; the ability to realise anticipated synergies and cost savings; technology risks, including dependence on core technology; fluctuations in quarterly results; dependence on new product development; rapid technological and market change; reliance on sales by others; management of growth; dependence on key personnel; rapid expansion; growth of the Internet; financial risk management; and future growth subject to risks. Autonomy cautions shareholders not to place undue reliance on these forward-looking statements, which reflect the view of the Autonomy only as of the date of this announcement. The forward-looking statements made in this announcement relate only to events as of the date on which the statements are made. Autonomy will not undertake any obligation to release publicly any revisions or updates to these forward-looking statements to reflect events, circumstances or unanticipated events occurring after the date of this announcement, except as required by law or by any appropriate regulatory authority.