Callidus Software Hit With Downgrade After SAP Buyout

Enterprise software and SaaS name Callidus Software Inc. CALD announced an agreement Jan. 29 to be bought out by SAP SE (ADR) SAP's American unit.

The Analyst

B. Riley FBR analyst Kevin Liu downgraded Callidus Software from Buy to Neutral and increased the price target from $28 to $36, to match the acquisition price.

The Thesis

SAP has agreed to pay $36 in cash for each Callidus share, resulting in a total enterprise value of $2.4 billion, Liu said in a Wednesday note. The deal price reflects a 10-percent premium over the closing price on Jan. 29 and a 21-percent premium over the 30-day volume weighted average price per share, according to B. Riley. 

The valuation suggested by the transaction price is a favorable outcome for the company's shareholders, the analyst said. The deal represents a premium to what rival Xactly Corp XTLY fetched when it sold itself to Vista Equity Partners.

"In regards to the potential for a higher bid, we surmise that other strategic vendors like salesforce.com, inc. CRM or Oracle Corporation ORCL have had ample opportunity to pursue CALD, and the final purchase price suggests a thorough process," Liu said. 

At this juncture, B. Riley does not see the possibility of a rival offer emerging.

Callidus Software is scheduled to release its fourth-quarter results after the market close Feb. 8, with the company expecting pro forma EPS of11-12 cents on revenues of $65 million to $66 million.

The Price Action

Shares of Callidus Software were up about 79 percent over the year up until the announcement of the deal.

Shares were up 0.28 percent at $36.05 at the time of publication Wednesday afternoon. 

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