Under the deal, IBM will pay about $340 million to buy ILOG. The amount represents a 37% premium over the NASDAQ-listed company's closing share price Friday. ILOG's board of directors said it expects to formally approve the transaction prior to September 15.
The deal also requires a nod from antitrust authorities in the U.S. and Europe.
IBM said the acquisition will strengthen its portfolio of so-called business process management software. BPM tools allow companies to knit together discrete processes, such as order taking and shipping, to create automated supply and fulfillment chains.
"Companies across all industries are looking for technologies to help them manage their processes with more flexibility so they can keep up with changing business conditions," said Tom Rosamilia, general manager for IBM's WebSphere group, in a statement.