Analysts caution the $6.8 billion deal looks late and pricey
By Aude Lagorce, MarketWatch, Last Update: 5:38 AM ET Oct 8, 2007
LONDON (MarketWatch) -- Shares of SAP AG fell as much as 5.5% on Monday after the world's largest maker of business software agreed to buy business intelligence firm Business Objects for more than 4.8 billion euros ($6.8 billion) in cash over the weekend.
SAP will offer 42 euros in cash for each share in Business Objects, a 20% premium over the stock's closing price on Friday. SAP will finance the deal with available cash and borrowed funds.
The acquisition is SAP's largest to date and a reversal of its avowed organic-growth strategy. The Germany-based giant said the primary driver for the deal was the opportunity to gain new business. The company is racing to double its customer base to 100,000 by 2010 by wooing more small- and medium-sized firms.
"The acquisition of Business Objects is in keeping with SAP's stated strategy to double our addressable market by 2010 as announced in 2005,"said SAP Chief Executive Henning Kagermann.
The purchase comes in the wake of a shopping spree by rival Oracle Corp which has spent more than $25 billion on acquisitions since 2005. Earlier this year, Oracle bought Business Objects' competitor Hyperion Solutions for $3.3 billion.
SAP shares were last down 5% in Frankfurt morning trading. Business Objects shares rose 17.2% to 41 euros in Paris.
Analysts were quick to point out the U-turn in SAP's strategy.
As recently as last month, Kagermann indeed said he wasn't under any pressure to make a large acquisition.
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