VMware, the listed, California-based operational software company, will buy privately-held SpringSource, which develops application and management software.

The $420 million deal will be paid mostly in cash, with the buyer assuming an additional $58

VMware will acquire SpringSource for approximately $362 million in cash and equity plus the assumption of approximately $58 million of unvested stock and options. Among SpringSource’s investors are Benchmark Capital, which already scored a win when the VC investor’s support of FriendFeed paid off with Facebook’s buy of that platform.

“VMware maintains the broadest product portfolio and a technological lead in the virtualization space,” said a report by Lazard Capital Markets posted at Thomson Analytics. It added: “We believe the current valuation is unwarranted, as the near term environment remains challenging and VMware is undergoing a strategic transition that increases the company’s risk profile.”

In a recent interview with mergersunleashed.com sister publication IDDmagazine.com, tech banker Ian McLeod, a Goldman Sachs veteran turned Qatalyst Group partner, said that consolidation across enterprise technologies should persist even in an economic downturn as larger players look for growth and greater account control.

Wilson Sonsini and Wilmer Hale advised VMWare; Cooley Godward Kronish LLP, led by Craig Jacoby, advised SpringSource on the deal.

Also on the transaction, Cooley partner Jennifer Fonner DiNucci and special counsel Kara Hagen and Francis Fryscak worked on the deal. From Wilson Sonsini, Mike Ringler and Jeremiah Gordon worked to support the transaction.

The deal is expected to close in the third quarter of this year and has already been approved by SpringSource’s shareholders.

KKR and Silver Lake Partners exited their Avago Technologies Ltd. investment of four years when they brought the semiconductor maker public, and that tech play seemed to trigger investor optimism (shares nearly hit $17 each, up more than 10%) after the IPO, only to gravitate closer to the offering price by press time Tuesday.

For its part, VMware’s shares were down a little more than one percent in Tuesday afternoon trading, to $31.58.

Comment was not offered by press time.

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