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SAP to Acquire Concur Technologies$8.3 Billion Deal for Maker of Expense Management Software Expands SAP's Cloud-Based Businesses
SAP SE agreed to buy Concur Technologies Inc. in a deal valued at $8.3 billion, allowing the German software giant to expand into travel-related software for hotels and tourism services.
The deal with Concur, which makes software to help employees manage their expense accounts, would be the most expensive in SAP's history, according to Dealogic, ranking above SAP's $7.1 billion acquisition of Sybase Inc. in 2010.
It also ranks among the 10 largest software deals, according to Dealogic, along with Hewlett-Packard Co.'s $11.7 billion deal for Autonomy Corp. and Oracle Inc.'s $10 billion purchase of PeopleSoft Inc. in 2003.
The deal also sets a new mark for companies offering cloud computing, or providing service over the Internet, rather than selling software.
SAP Chief Executive Bill McDermott said it was " the largest acquisition in the history of the cloud industry."
Concur shareholders would receive $129 per share, a 20% premium over Wednesday's closing price of $107.80.
Analysts had mixed views on the deal and investors reacted negatively to the steep price SAP is paying. Shares dropped more than 3% in midday trade in Frankfurt.
"The deal multiple is quite rich, given that travel and entertainment is not strengthening SAP's core business or bringing its cloud business (from a technological viewpoint) to the next level," Commerzbank analyst Thomas Becker said, questioning whether Concur is the right choice. Commerzbank downgraded the SAP's stock to add from buy, predicting it would take SAP a long time to achieve synergies and given the more limited scope for further deals.
In recent years, SAP has invested in cloud-based computing business including human-resources application SuccessFactors, an e-commerce application called Ariba and Fieldglass, which allows companies to manage contingent workers and services.
Analysts at Citigroup noted that SAP's execution in cloud with SuccessFactors and Ariba has been largely successful and "if SAP can bring similar execution to this transaction, we think the deal, even at a steep price, will pay off."
Concur provides its software as a service delivered via the Internet, while most of the software SAP sells today, managing everything from companies' supply chains to their financial ledgers, is integrated directly into those companies' computer systems.
"While this particular acquisition was a surprise, the idea of major [mergers & acquisitions] in the cloud was something we have argued for some time as the medium-term targets made little sense without it," Berenberg analyst Daud Khan said.
Mr. McDermott said the company will update its outlook after the completion of the takeover, which is expected either in the last quarter of this year or first quarter of next year.
"There's a desperate race for cloud scale," said Mark Moerdler, an analyst at Sanford C. Bernstein. "Everyone needs to be big; hopefully they'll gain scale efficiency out of it."Cloud software companies have been growing more quickly than their rivals that sell actual software. Cloud software can be installed and updated more easily and less expensively than the more traditional product.
Mr. McDermott said Concur hadn't put itself up for sale, but SAP approached its CEO, Steve Singh, about 90 days ago to explore a takeover.
"We are making a bold move to innovate the future of business within and between companies," Mr. McDermott said.
Credit Suisse agreed, calling it an aggressive move not only because it extends SAP's cloud offerings but because of its ability to grab an "attractive, defensible asset" ahead of a potential gains in both revenue growth and margins.
Founded in 1993, Bellevue, Wash.based Concur posted a loss of $24.4 million on revenue of $546 million in the fiscal year ended Sept. 30, 2013.
Mr. McDermott, the first American to run SAP, said the addition of Concur would mean its business network will now handle transactions totaling more than $600 billion annually.
Asked on an analyst conference call if SAP will continue making acquisitions, Mr. McDermott said it doesn't have a long list of companies it is planning to buy.
SAP said it would use a credit facility of up to €7 billion ($9 billion) to finance the purchase, as well as debt refinancing and acquisition-related costs.