IBM buying employee management software maker Kenexa for about $1.26 billion

ARMONK, N.Y. – IBM is buying human resources software company Kenexa Corp. for about $1.26 billion, adding to its stable of cloud-based software.

The Monday announcement sent Kenexa’s stock to the highest point since it began trading in mid-2005.

Kenexa’s HR software is designed to help companies recruit workers and manage employees. The Wayne, Pennsylvania, company says it has more than 8,900 customers. IBM said that it plans to continue to support Kenexa’s clients while also giving them access to IBM’s offerings.

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The acquisition helps make the Armonk, New York, company more competitive with database maker Oracle Corp. and German business software maker SAP AG, said Rick Sherlund of Nomura Equity Research. Oracle and SAP have both recently been buying “cloud computing” companies. Such technology allows businesses to run software remotely rather than installing software in-house.

IBM Corp. said that it will pay $46 per Kenexa share, a 42 per cent premium to the company’s Friday closing price of $32.39. Kenexa has about 27.4 million outstanding shares, according to FactSet.

Kenexa stock jumped $13.45, or 41.5 per cent, to $45.83 in midday trading Monday. Earlier in the session the stock reached $45.93, its highest point since the employee management software maker started trading in June 2005. Shares had gained 21 per cent this year.

IBM stock slipped $1.15 to $196.62.

Kenexa’s board unanimously approved the deal, which is expected to close in the fourth quarter. It still needs approval from the company’s shareholders and regulators.