Enterprise software provider SAP has agreed to buy Sunnyvale, Calif.-based Ariba, a cloud-based business commerce network. The value of the deal is if $45 per share, approximately $4.3 billion.
Ariba makes Web-based software hosted in the cloud that connects suppliers and buyers online. SAP said the move positions it in a fast-growing segment as buyers and sellers across the globe connect in new ways through the cloud.
"The cloud has profoundly changed the way people interact," said SAP Co-CEOs Bill McDermott and Jim Hagemann Snabe in a prepared statement. "The impact will be even greater as enterprises connect and collaborate in new ways with their global networks of customers and partners. 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."
Industry experts estimate the cloud-based enterprise network and procurement segment at a current size of about $5 billion in revenue. The Ariba network facilitates more than $319 billion in commerce transactions, collaborations, and intelligence among more than 730,000 companies.
Carter Lusher, chief IT analyst at London-based Ovum, said the move is about not only acquiring Ariba's global trading network, but a "talent grab" around the business issues of cloud computing and developing applications for the cloud.
"This is a logical step for SAP as it needs to accelerate its move into the cloud," said Lusher. "This acquisition is consistent with SAP’s overall M&A strategy and complements the SuccessFactors acquisition in December – providing greater depth of products, executives, and tech talent for the cloud."
Ariba has approximately 2,600 employees. It is also the second-largest cloud vendor by revenue, according to SAP. 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 Ariba board of directors has unanimously approved the transaction. The per share purchase price represents a 20 percent premium over the May 21 closing price and a 19 percent premium over the one month volume weighted average price per share. 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