SAP to Acquire Sybase - Analyst Blog

SAP AG (SAP) and Sybase Inc. (SY) announced that SAP's subsidiary, SAP America Inc., has signed an agreement to acquire Sybase Inc.in a transaction that will strengthen the two information technology (IT) leaders.

SAP America Inc. will make an all cash tender offer for all of the outstanding shares of Sybase common stock at $65.00 per share, representing an enterprise value of approximately $5.8 billion. The purchase price represents a 44% premium over the most recent three-month average stock price of Sybase. The transaction will be funded from SAP's cash on hand and €2.75 billion loan facility arranged and underwritten by Barclays Capital, a wing of Barclays (BCS), and Deutsche Bank (DB).

SAP will accelerate the reach of its solutions across mobile platforms and drive forward the realization of its in-memory computing vision. This will drive higher user requirement of SAP software and unlock significant business value out of existing customer relationships. In addition, Sybase's innovative mobile platform can connect all applications and data and activate them on mobile devices.

For Sybase, SAP in-memory technology will provide the opportunity for dramatic performance improvements to its analytic process capabilities. Sybase will also be able to bring its complex event processing and analytics expertise, which was built in the financial sector, to customers in other industries, markets and product areas in which SAP has a complementary, strong presence.

It has been agreed that Sybase will operate as a standalone unit under the name ‘Sybase, a SAP Company.’ Sybase's management team will continue to run the business. The SAP Executive Board is expected to propose to the Supervisory Board to appoint the Chairman and CEO of Sybase to SAP's Executive Board.

The transaction is expected to close during the third quarter of 2010 and will be immediately accretive to SAP's earnings per share on a non-IFRS adjusted basis. The closure of the transaction is dependant on customary closing conditions.

SAP is the leader in the worldwide enterprise applications market. Its primary focus is on high-margin software license sales, since this category benefits the most from the improving information technology (IT) spending environment. The company’s 80% win rate remains significantly high against its next largest competitor. This has been possible due to nearly decades of organic growth in developing and delivering more than 25 end-to-end industry-specific platforms. It has a clearly defined product roadmap, a service-oriented architecture with more than 2,800 enterprise services and a fully-integrated suite of solutions for large and small enterprises.
 
The company remains best positioned in the European software space, given its top-tier positioning, strong service-oriented architecture (SOA) adoption trends and its diversified industry and geographic footprint. In the medium term, SAP’s challenges will be to expand its share of the mid-market through the Business by Design initiative. SAP’s Business by Design product will provide an on-demand solution for mid-sized companies, but it is still in a nascent stage. The company expects to get the product rolling in 2010.
 
Headquartered in Walldorf, Germany, SAP AG is one of the largest independent software vendors in the world and the leading provider of enterprise resource planning (ERP) software. Its solutions are designed to cater to the needs of organizations, ranging from small and medium businesses to large, global enterprises.
 
We currently have a Neutral recommendation on SAP.