SAP Pins Hopes on Sybase Purchase

123jump.com Staff
13 May, 2010
New York City

German software maker SAP AG agreed to acquire Dublin, California-based software company Sybase Inc for $5.8 billion in an all cash deal to improve sagging sales by using Sybase

[R]6:00 PM Frankfurt, 1:00 PM New York - German software maker SAP AG agreed to acquire Dublin, California-based software company Sybase Inc for $5.8 billion in an all cash deal to improve sagging sales by using Sybase’s mobile platform.[/R]

William McDermott and James Hagemann Snabe, the two new Co-CEOs appointed three months ago to oversee the turnaround in the sales of SAP AG have bought Sybase Inc for $5.8 billion including a $506 million debt of Sybase Inc.

Sybase shareholders will receive $65 per share which is a 44% premium to the Sybase’s three-month average price. The transaction would be funded from SAP’s cash on hand and a 2.75 billion euro debt from Barclays Capital and Deutsche Bank.

The acquisition has been approved by the companies’ board of directors but requires a regulatory clearance.

With Sybase’s acquisition, SAP adds software that helps corporate customers run applications on mobile devices. A slump in sales had led to the exit of the previous CEO Leo Apotheker and the new incumbents are hoping to reverse the trend through acquisitions.

SAP had studiously avoided acquisition even as its peer Oracle spent more than $42 billion on 64 acquisitions since January 2005.

Sybase stock price soared 35% to $56.14 yesterday on the New York Stock Exchange after the talks became public. That was the largest one day gain since the company was listed in 1991. The stock rose to $64.33 in trading today.

SAP shares dropped 2.6% to 35.12 euros in Frankfurt trading today.

SAP business applications are used by most companies to track orders, manage inventory levels and plan delivery schedules. Sybase writes software to help handset users do business from mobile devices. SAP will use the acquisition to cater to customers that want employees to use tablets and smartphones on the go.

As they were competing with Oracle Corp the SAP executives agreed to pay 15 times Sybase’s EBITDA, which is a much higher ratio than the 8.4 times EBITDA paid for takeover of software companies in the past year.

John Chen, the current CEO of Sybase will continue to run Sybase as an independent unit and will also join SAP’s executive board. SAP doesn’t plan to eliminate jobs from Sybase, McDermott said.

SAP was advised by Deutsche Bank AG and Barclays Plc and received legal counsel from Jones Day. Sybase’s financial adviser was Bank of America Corp. and its legal adviser was Shearman and Sterling LLP.