SAP To Acquire Business Objects For Euro 4.8 Bln - Update

SAP To Acquire Business Objects For Euro 4.8 Bln - Update

(RTTNews) - Signaling a shift in its strategy of growing organically, SAP AG (SAP) announced late Sunday an agreement to acquire French business intelligence software maker Business Objects (BOBJ) in a 4.8 billion euro deal. The acquisition is to be made through an open tender offer for all of Business Objects' outstanding shares, valuing each at 42 euros per share. The board of directors of Business Objects has approved the tender offer agreement and committed to recommend the offer to its shareholders subject to fulfillment of regulatory conditions. Following the transaction, Business Objects will operate as a stand-alone entity, while both companies will share executives and resources.

Neither company intends to undertake significant restructuring on account of the transaction. SAP has more than 41,000 customers in 120 countries running SAP applications. Business Objects is a business intelligence or BI software company with solutions ranging from information discovery and delivery, information management, analysis and performance management categories for more than 44,000 customers around the globe. Business Objects ranks ahead of Cognos Inc. (COGN) and Hyperion Corp. in the business intelligence software market, which is worth more than $2 billion.

The transaction is to take the form of a tender offer under French law and a parallel tender offer under U.S.law for all shares of Business Objects as well as American Depositary shares representing that company's ordinary shares, in addition to all convertible bonds and warrants issued by Business Objects. SAP said that the price to be offered per convertible bond would be Euro 50.65 and added that the offers will be only opened for acceptance on clearances from the French stock exchange authority- the Autorite des marches financiers or "AMF- and the French Finance Ministry.

The offer will be subject to certain conditions, namely, that the Business Objects' securities tendered in the offer represent at least 50.01% of all voting rights on a diluted basis, and receipt of EU and U.S.antitrust approval, SAP said.

The transaction is expected to close in the first quarter of 2008 and be accretive to SAP's earnings per share on a U.S. GAAP basis in 2009 and beyond. However, on account of acquisition-related one time effects in 2008, SAP expects the transaction to be dilutive by mid-single digits Euro cents to its earnings per share on a U.S. GAAP basis in fiscal year 2008.

Business Objects has been the subject of repeated takeover speculation for several months. Earlier, Oracle (ORCL) and IBM (IBM) also been mentioned as possible bidders. Business Objects shares advanced in February and in September last year amid speculation that Oracle might bid for the company.

SAP said that through the acquisition of Business Objects, it intends to offer high-value solutions for process- and business-oriented professionals, which will be designed to enable companies to strengthen decision processes, increase customer value and create sustainable competitive advantage through real-time, multi dimensional business intelligence. The company also said that its growth strategy is to significantly increase its revenues from new products, which would address the growing demands of Business Users.

Commenting on the deal, Henning Kagermann, CEO of SAP said, "We are highly committed to the next generation of applications serving Business Users. The combination of SAP and Business Objects in their respective domains will benefit customers, prospects, partners, employees and shareholders. At SAP, we are excited about the prospect of having Business Objects join the SAP Group."

Kagermann added, "With the delivery of the first business process platform; the rapid adoption of our enterprise SOA platform, SAP NetWeaver; and the successful launch of the first complete on-demand business solution for mid-sized companies, SAP Business ByDesign, SAP can now take the opportunity to focus on the industry's next high-growth opportunity, by accelerating and enhancing our efforts for the Business User category."

Bernard Liautaud, Chairman and Founder of Business Objects said, "Business Objects helps companies transform the way they work through the use of intelligent information. The combination of Business Objects and SAP means that we can truly amplify the reach of Business Intelligence - from the C-suite to Main Street."
SAP noted that the acquisition of Business Objects is in line with its strategy to double its addressable market by 2010 as announced in 2005, and added that it would accelerate its growth in the Business User segment while complementing its organic growth strategy. .
Following the transaction, Business Objects will operate as a stand-alone business as part of the SAP group. SAP noted that customers of Business Objects would continue to benefit from open, broad and integrated business intelligence solutions, which are independent of databases and applications, even while gaining the advantage of application alignment for business analytics. Further, the company said that Business Objects would enhance its BI portfolio scope and capacity with SAP people, know-how and networks.
SAP noted that the solutions from Business Objects would complement the offerings the company already provides for Business Users. On completion of the transaction, John Schwarz will continue as the CEO of the Business Objects entity and is expected to be added as a member to the SAP Executive Board. Doug Merritt, Corporate Officer of Business User, SAP will join the Business Objects entity and report to Schwarz.
Subject to the closing of the transaction, SAP's Supervisory Board intends to propose to elect the founder of Business Object, Bernard Liautaud, to the Supervisory Board at the company's next shareholder meeting. Liautaud will have an advisory role to Kagermann on aspects of strategy and integration until that time.
Goldman Sachs (GS) is acting as financial advisor to Business Objects, while Deutsche Bank Securities Inc. (DB) is acting as financial advisor to SAP.
Separately, on Sunday, Business Objects provided preliminary results for the third quarter. The company said that it expects U.S. GAAP earnings per share for the quarter in a range of $0.04-$0.06, while non-GAAP earnings per share is expected in a range of $0.36-$0.39. On average, twenty-three analysts polled by First Call/Thomson Financial expect the company to earn $0.46 per share for the quarter.
Business Objects forecast revenue for the third quarter in a range of $366-$370 million. Analysts expect the company to report revenues of $385.16 million for the quarter.
The company said that of the total revenues, it expects license revenue in a range of approximately $137-$139 million and services revenue of approximately $229-$231 million. Business Objects expects to announce its financial results for the third quarter on October 24, 2007.
Last month, SAP said it purchased the software license and maintenance business of SAP Arabia, which is its exclusive long-term partner in the region. Financial terms of the all-cash deal were not disclosed. The company noted that the transaction is subject to customary closing conditions and expects the acquisition to complete in fourth quarter of 2007.
Among SAP's peers, Oracle said in March that it would buy Hyperion Solutions Corp. for $3.3 billion in cash, in a bid to surpass SAP in the business intelligence software market. Oracle said that it will pay $52 a share for Hyperion. To boost its growth in applications as its traditional database has slowed, Oracle has spent more than $20 billion on companies including PeopleSoft and Siebel Systems.
In July, SAP reported an 8% growth in its profit for the second quarter to EUR 449 million from EUR 415 million in the prior-year period, aided by a 16% upside in revenues from software and software related services divisions, together with a positive impact from effective tax rate. Total quarterly revenues increased 10% to EUR 2.42 billion from EUR 2.20 billion in the prior-year period, driven by double-digit growth in all regions, despite a flat result from professional services division.
Business Objects reported a net income for the second quarter of $21.60 million or $0.22 per ADS in July, up from $7.95 million or $0.08 per ADS a year ago, helped by strong demand in Europe and an acquisition in France. On a non-GAAP basis, the company's earnings per share soared 55% to $0.48. The company's second-quarter revenues rose 23% to $363.23 million from $294.48 million in the similar period of last year.
SAP closed Friday's regular trading session at $59.23, up $1.34 or 2.31% on a volume of 2.77 million shares. In the 52-week period, the stock has been trading in a range of $44.17-$59.86.
BOBJ closed Friday's regular trading session at $50.27, up $2.71 or 5.70% on a volume of 4.34 million shares. In the 52-week period, the stock has been trading in a range of $33.45-$50.46.
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