SAP to Expand Cloud Presence with Acquisition of Ariba
SAP AG (NYSE: SAP) and Ariba, Inc. (Nasdaq: ARBA) today announced that SAP’s subsidiary, SAP America, Inc., has entered into an agreement to acquire Ariba, the cloud-based business commerce network, for $45.00 per share, representing an enterprise value of approximately $4.3 billion. The acquisition will combine Ariba’s buyer-seller collaboration network with SAP’s broad customer base and deep business process expertise to create new models for business-to-business collaboration in the cloud.
The Ariba board of directors has unanimously approved the transaction. The per share purchase price represents a 20% premium over the May 21 closing price and a 19% premium over the one month volume weighted average price per share. The transaction will be funded from SAP’s free cash and a €2.4 billion term loan facility. The transaction is expected to close in the third quarter of calendar year 2012, subject to Ariba stockholder approval, clearances by relevant regulatory authorities and other customary closing conditions. The transaction is expected to be accretive to SAP’s non-IFRS earnings per share in 2013.
With the addition of Ariba, SAP will acquire cloud-based collaborative business commerce technology. The move positions SAP in a fast-growing segment as buyers and sellers across the globe connect in new ways through the cloud.
SAP’s entry into the inter-enterprise business network space significantly expands its growth opportunities and accelerates its momentum in the cloud. Last week, SAP announced the roadmap for its cloud applications business (Software-as-a-Service), focusing on managing customers, suppliers, employees, and financials, in addition to its cloud suite offerings SAP Business ByDesign and SAP Business One. The acquisition will also significantly boost SAP’s cloud applications portfolio with the addition of Ariba’s cloud-based procurement solutions.
Headquartered in Sunnyvale, California, Ariba has approximately 2,600 employees. The company provides cloud-based collaborative commerce applications and the second-largest cloud vendor by revenue. Ariba combines industry technology with a web-based trading community to help companies discover, connect and collaborate with a global network of partners – all in a cloud-based environment. With $444 million in total revenue, Ariba experienced 38.5 percent annual growth in 2011. Its business network recorded 62 percent organic growth in the same period.
“The cloud has profoundly changed the way people interact. The impact will be even greater as enterprises connect and collaborate in new ways with their global networks of customers and partners,” said SAP Co-CEOs Bill McDermott and Jim Hagemann Snabe. “Cloud-based collaboration is redefining business network innovation, and we are catching this wave in the early stage of its evolution. The addition of Ariba will create the business network of the future, deliver immediate value to our customers and provide another solid engine for driving SAP’s growth in the cloud.”
Businesses to Benefit from Combination
Industry experts estimate the cloud-based enterprise network and procurement segment at a current size of $5 billion in revenue. The Ariba network is the largest and most global trading network, connecting and automating more than $319 billion in commerce transactions, collaborations, and intelligence among more than 730,000 companies. SAP’s global customer base of more than 190,000 companies includes the largest buyers and sellers in the world, offering great potential to increase the number of participants, as well as the volume and types of transactions conducted through this network. Already today 63% of the world’s transaction revenue touches an SAP system. SAP and Ariba will facilitate collaborative commerce within and between companies of all sizes.
The combination of SAP’s core applications with the Ariba cloud-based network may create new business value for customers:
- Potentially, SAP and Ariba can deliver a truly end-to-end solution that enables companies to achieve a closed-loop from source-to-pay, regardless of whether they deploy in the cloud, on-premise or through a combination of both.
- Ariba’s open network and SAP’s integration expertise may facilitate participation and extend the benefits of business collaboration to associated companies, on any system, from any provider.
- The Ariba network may benefit from the performance delivered by using SAP’s flagship in-memory platform SAP HANA.
- Relationship and transaction information from commerce activity in the Ariba network together with SAP’s analytics may provide real-time insights to enable trading partners to discover, connect and collaborate more effectively.
- All SAP customers maybe able to easily connect to the business network through pre-built integration points.
- Through the combination of the business network procurement solutions from Ariba and SAP, organizations can potentially gain 360-degree business intelligence and effectively demonstrate that spending activities, contracts, and supplier interactions adhere to corporate compliance guidelines.
“In our personal lives, networks are playing an increasingly important role in how we connect, share, and shop – bringing more insight and efficiency into everything we do,” said Bob Calderoni, CEO, Ariba. “Businesses are looking for the same connectedness, insight, and efficiencies in the processes and collaboration with customers, suppliers, and partners beyond the walls of their companies. By combining Ariba’s open global trading network and SAP’s solutions and analytics, we are ushering in a new era of business-to-business collaboration and driving new levels of productivity.”
Upon completion of the transaction, it is planned to consolidate all cloud-related supplier assets of SAP under Ariba. The existing management team will continue to lead Ariba, which will operate as an independent business under the name “Ariba, an SAP company.” The SAP Executive Board intends to nominate Ariba CEO Bob Calderoni to the SAP Global Managing Board after closing of the transaction and subject to the approval of the SAP Supervisory Board.