SAP has agreed to acquire Ariba, a business-to-business ecommerce network, for $4.3bn as the German enterprise software company expands its cloud offerings.
SAP offered $45 a share for the Silicon Valley company – a 20 per cent premium over Ariba’s closing price on Monday. Ariba’s board unanimously approved the deal, which is expected to close at the end of August.
Ariba was founded in 1996 and came to the market in 1999, when its shares nearly tripled in value on their opening day. It reached a market capitalisation of $40bn at the height of the dotcom bubble in 2000.
SAP has been expanding into the cloud – the remote provision over the internet of software as a service – with acquisitions. It bought Crossgate, a business-to-business document and data exchange service last September for an undisclosed sum and paid $3.4bn in December for SuccessFactors, a provider of online tools for managing employees.
Oracle, its biggest rival, has also been acquiring cloud companies, paying $1.9bn for Taleo and $1.5bn for RightNow in recent months.
Bill McDermott, SAP co-chief executive, told an analyst conference call that Ariba was the most successful global trading network in the world
“We are taking another bold step in our strategy to achieve leadership in the cloud,” he said. “With this acquisition, SAP will also become the clear leader in on-demand supplier relationship management or SRM,” a market segment that grew 20 per cent in 2011.
Ariba employs about 2,600 people and reported revenues of $444m in 2011, up 38.5 per cent from 2010. Its network connected and automated more than $319bn in transactions. Buyers and suppliers pay for its services by subscription.
SAP says its customers make up the majority of the top 2,000 companies globally and their annual spending of $12tn with suppliers means there is a huge growth opportunity if they can all be connected through Ariba.
While it will integrate it with SAP business software products, Ariba will still serve non-SAP customers and will continue to be run as an independent business known as “Ariba, an SAP company”. Bob Calderoni, its chief executive, is expected to join the SAP global managing board.
SAP, based in Walldorf, Germany, intends to fund the transaction with cash on hand and a €2.4bn loan. It expects Ariba to be accretive to earnings per share in 2013.
Mr Calderoni said Ariba would be given additional resources and reach by joining SAP, accelerating progress on its goal of enabling more than $1tn in commerce by 2015.
Ariba has more than 420 strategic large buyers including Walt Disney, Deutsche Bank, BHP Billiton and ExxonMobil. Walt Disney carries out more than 900,000 transactions with more than 7,000 suppliers a year on Ariba.