Software firm SAP to buy Ariba for $4,3bn

SERVICES NEWS

Business Day - May 24th 2012, 12:53

SAP, the largest maker of enterprise applications software, yesterday agreed to buy Ariba for $4,3bn in the German company’s second multibillion-dollar purchase in cloud computing to take on Oracle. 

SAP would pay $45 a share, or 20% more than Ariba’s May 21 closing price, SAP said. The transaction, subject to approval, would probably be completed by the end of August, SAP chief financial officer Werner Brandt said yesterday.

Ariba is the leader in cloud-based collaborative commerce applications, counting BHP Billiton and Deutsche Bank among customers it connects to more than 730000 suppliers. As competition in on-demand software intensifies, SAP has increased its pace of acquisitions, last buying SuccessFactors in December. With businesses increasingly choosing to store and process data on the web, SAP is shifting many of its staple applications to the internet. "We don’t have the DNA in the cloud," SAP joint CEO Bill McDermott said. "We’re probably the most strategic cloud player in the enterprise software industry."

SAP fell ¤1,12, or 2,3%, to ¤46,69 in Frankfurt yesterday. Ariba jumped 19% to ¤44,87 at Tuesday’s close in New York.

In more than 60 enterprise software takeovers since 2002, the median multiple buyers paid was about 16 times earnings before interest, taxes, depreciation and amortisation (ebitda), according to data. That compares with the 106 times trailing 12-month ebitda SAP has offered for Ariba, data shows.

Ariba’s ebitda is projected to more than quadruple to $125m in the 12 months through September.

SAP’s acquisition of Ariba would be the largest enterprise software transaction since Hewlett-Packard bought Autonomy Corporation for more than $10bn last year, data show. There have been almost 1200 of those transactions globally over the past decade, with a value topping $80bn.