IBM Announces Plans to Acquire ILOG

ILOG has signed an agreement regarding a proposed acquisition by IBM of ILOG to be implemented by way of concurrent cash public tender offers in both France and the United States. Through this proposed transaction, IBM will combine its business process management (BPM), business optimization, and service oriented architecture (SOA) technologies with ILOG's Business Rules Management Systems software. This will enable IBM to help clients deliver critical business information in real-time, allowing them to make better business decisions faster.

The cash tender offer will be at a price of ?10 per ordinary share and the U.S. dollar equivalent per American Depositary Share ("ADS") based on the Euro/U.S. dollar exchange rate as of the settlement of the tender offers, amounting to an aggregate purchase price of approximately ?215 million or approximately $US340 million on a fully diluted basis. This price represents a premium of approximately 56 percent compared to ILOG's one month average of closing share prices prior to July 28, 2008, and a 37 percent premium to the closing price of Friday, July 25.

ILOG's board of directors has approved the transaction between the two companies and, subject to the receipt of a satisfactory fairness opinion regarding the financial terms of the offer, is expected to give a final recommendation prior to September 15, following which the offer should be filed with the French stock exchange authority (AMF).

IBM has received commitments from certain shareholders to tender their shares to the contemplated offer, which represent approximately 10 percent of ILOG's issued share capital.

The public tender offers will be conditional upon U.S. and EU antitrust clearances and a 66.67 percent share capital and voting rights minimum tender acceptance condition (on a fully diluted basis). The offer in
France will only be opened for acceptances once the AMF and the French
Ministry of Economy have granted their respective clearances.

The full text of the Memorandum of Understanding (MOU) between the two companies will be filed with the SEC today as an exhibit to ILOG's Report of Foreign Private Issuer on Form 6-K. A summary in French of the MOU can be found on ILOG's website (http://www.ilog.com).

When completed, the acquisition of ILOG will strengthen IBM's BPM and SOA position by providing customers a full set of rule management tools for complete information and application lifecycle management across a comprehensive platform including IBM's leading WebSphere application development and management platform.

BPM allows companies to model, automate, monitor, and redesign business processes, such as opening a bank account, documenting a medical record, or customizing an insurance policy. It enables companies to improve customers' service and increase efficiency, automation and accuracy. Using BPM, companies can examine tasks within an organization - particularly those done manually or involving significant document processing - and apply BPM to automate or streamline them. Such processes are becoming increasingly critical as business operations become more complex and information volumes grow at phenomenal rates.
Building on IBM's existing capabilities, ILOG will help customers manage change and complexity in their business processes by providing powerful, yet easy-to-use business tools.

For example, a business rule might be applied to elevate a premier customer to the front of a phone queue as part of a customer service process. ILOG's Business Rule Management System provides users with tools that allow greater control over the criteria that determine how and when to route those premier customers. As such, businesses can accelerate the process of initiating policy changes that may be driven by market trends or competitive activity to ensure customer satisfaction is maintained.

ILOG technology has the potential to add significant capability across
IBM's entire software platform and bolster its existing rules management offerings. This includes improved rules and business optimization capabilities for Information Management offerings, better visualization for Lotus products, enhanced optimization within Tivoli solutions, and efficient supply chain management assets for planning and scheduling.

ILOG offers tools and technologies for business managers, analysts, architects and developers to use as they analyze, plan, track and improve business processes. Today, hundreds of large enterprises use
ILOG technologies to automate the allocation of scarce resources and to build smart interfaces into their business processes. Additionally, scientists and mathematicians from hundreds of universities use ILOG products for advanced research, design, and analysis.

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