Hummingbird Ltd. Wednesday said it would pay US$16.5 million to purchase a privately-held British firm that could improve its ability to serve government customers around the world.

Valid Information Systems specializes in records management software that complies with local legislation governing the use of customer and citizen data. Hummingbird, which offers what it calls enterprise information portals to help businesses keep tabs on data across the enterprise, will be added to its product line, executives said. Valid will become a Hummingbird wholly-owned subsidiary and its employees will remain in their current positions, Hummingbird said.

Hummingbird CEO Fred Sorkin said Valid’s software would become the foundation of its next-generation Hummingbird Enteprise suite and could potentially accelerate its development. The company will demonstrate the Valid product at its next user summit in Februray 2004. While Valid will continue to be sold to European governments, Sorkin said there could be delays before it is offered to American or Canadian users.

“”It will take six, maybe eight months,”” he said. “”They have to go through approvals on the records management side. This is not because they canot do it, but because I think quite a bit of people stay in line for certification.””

Sorkin said Valid’s 95 customers include the British Office of the Deptuty Prime Minister, the Defence Procurement Agency and the Northen Irish Police Force.

Records management has become a major issue among governments around the world, particularly in health care where data is being converted from paper to electronic form. This year, for example, hospitals across Canada became subject to the Personal Information Protection and Electronic Documents Act, which will govern how they manage, store and share patient records. Companies like EMC have retooled products to help public sector organizations improve their ability to achieve compliance.

Under the terms of the agreement, Hummingbird may pay Valid another US$13 million over the next two years, based on performance targets. To date, most of the company’s revenue has come from software licensing. Sorkin said the product line has developed significantly over the last year.

“”In 2002 they were mostly involved in imaging and things that, quite honestly, were not interesting for us,”” he said.

Executives with Valid did not participate in the conference call.

Hummingbird has grown much of its business through acquisition over the last five years, beginning with Common Ground Software in 1996. In 1999, it successfully out bid Open Text for control of PC Docs, a supplier of document management software. Last week, the company bought Britain’s Kramer Lee & Associates, which serves the legal, insurance, financial and corporate market.

Despite owning more than three European companies, Sorkin said there was no hurry to consolidate Hummingbird’s operations overseas.

“”It’s possible to do it, but I think we’ll wait,”” he said. “”We don’t want to interuppt the people who are doing okay.””

Hummingbird’s customers include Kraft Foods’s Canadian operation and Inco Ltd., with whom it recently formed an agreement to streamline businesses processes.

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