SAP to buy Ariba for $4.3 billion; ups focus on cloud

BERLIN | SEATTLE: SAP, largest maker of enterprise-applications software, agreed to buy Ariba for $4.3 billion in the German company's second multi-billion purchase in cloud computing to take on Oracle.

SAP will pay $45 a share, or 20% more than Ariba's May 21 closing price, Walldorf, Germany-based SAP said on Tuesday. The transaction, subject to approval by Ariba shareholders and regulators, will probably be completed by the end of August, SAP chief financial officer Werner Brandt said on a conference call.

Ariba is the leader in cloud-based collaborative commerce applications, counting BHP Billiton and Deutsche Bank AG among customers it connects to more than 730,000 suppliers.

As competition in on-demand software intensifies, SAP has increased its pace of acquisitions, last buying SuccessFactors in December. With businesses increasingly choosing to store and process data on the Web, SAP is shifting many of its staple applications to the Internet.

"We don't have the DNA in the cloud," SAP co-CEO Bill McDermott said in an interview. "We're probably the most strategic cloud player in the enterprise software industry."

SAP fell e1.12 , or 2.3%, to e46.69 at 9:35 a.m. in Frankfurt. Ariba jumped 19% to $44.87 at yesterday's close in New York.

In more than 60 enterprise software takeovers since 2002, the median multiple buyers paid was about 16 times earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. That compares with the 106 times trailing 12-month Ebitda SAP has offered for Ariba, the data show.

Sunnyvale, California-based Ariba's Ebitda is projected to more than quadruple to $125 million in the 12 months through September, according to analyst estimates compiled by Bloomberg.

SAP's acquisition of Ariba would be the largest enterprise software deal since Hewlett-Packard Co. bought Autonomy Corp. for more than $10 billion last year, according to data compiled by Bloomberg. There have been almost 1,200 of those transactions globally over the past decade, with a value topping $80 billion.