The deal is worth $375 million (£186 million) and will allow Cambridge-based Autonomy to develop new software by pooling the two companies’ intellectual property.

The consideration is to be paid in cash, funded by an underwritten placing, debt and a portion of Autonomy’s cash reserves. Under the terms of the deal, Steve King, CEO of ZANTAZ, will continue to run the business.

Autonomy’s chief executive Dr Michael Lynch says that the deal expands the potential market, distribution, and reach for Autonomy’s products. Autonomy also expects cost synergies of approximately £13 million per year.

With a sufficient number of the acquirer’s shareholders already committed to the deal, the transaction is expected to be completed by August 2007.

Autonomy specialises in developing software that processes ‘unstructured data’, such as text, email, voice or video. The group’s turnover for 2006 was £124 million, and its pre-tax profits were £28 million.

ZANTAZ is headquartered in California. The 2006 turnover of the operational units that will be acquired by Autonomy was approximately £50 million.