SAP agrees to buy expense software maker Concur for $7.3 billion

Reuters News
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Posted: Sep 18, 2014 5:49 PM

By Harro Ten Wolde

FRANKFURT (Reuters) - German business software maker SAP <SAPG.DE> said on Thursday it has agreed to acquire U.S.-based expense management software maker Concur Technologies Inc <CNQR.O> in an all-stock deal valued at $7.3 billion that expands its presence in internet-based software or so-called cloud computing.

SAP said in a statement it would offer $129 per share for Concur, a 20 percent premium over the Sept. 17 closing price.

But the offer is just under the $130.36 record high Concur shares set in January, after a dramatic two-year upward run.

Based on 57 million outstanding shares, the offer for Bellevue, Washington-based Concur is valued at $7.3 billion. Including debt, the offer represents an enterprise value of about $8.3 billion, SAP said.

With the acquisition of Concur, the biggest in SAP's history, SAP will increase its cloud users to 50 million from 38 million currently.

Cloud computing allows businesses to cut costs by ditching bulky servers for network-based systems using remote data centers run by technology companies.

Global business spending on cloud services is expected to jump 20 percent this year to $174 billion, research firm IHS estimates. By 2017, spending will be more than $235 billion, triple the 2011 level, they expect.

"The acquisition of Concur is consistent with our focus on the business network," said SAP Chief Executive Bill McDermott.

Since early in the year, Concur stock slid more than 17 percent, due in part to a general retreat by investors from high-momentum stocks but also due to declining margins, according to a Jeffries’ investors note published in late April. Concur stock closed at $107.80 ahead of SAP’s offer.

The Concur shares trade at 44 times expected earnings before interest, tax, depreciation and amortization (EBITDA), according to Starmine data. This compares to a ratio of 30 for peer Salesforce.com <CRM.N>.

BIG IN BUSINESS

Concur has 23,000 clients that include companies, governments and universities, with more than 25 million users of its business expense and travel management software and services.

SAP said it expected significant synergies. Just about a third of Concur users run SAP software and the southern-Germany based company expects to add Concur customers.

The Concur acquisition gives SAP deeper access to an area of corporate finance where it is not dominant. "SAP now has a business network that is 75 percent bigger than Amazon, eBay and Alibaba combined," said CEO McDermott.

SAP is competing with global rivals including IBM <IBM.N> and Oracle <ORCL.O> to exploit surging demand for web-based software.

SAP entered the cloud business quite late in 2012 after spending $7.7 billion on buying internet-based computing companies Ariba and SuccessFactors.

It expects to get 3 billion-3.5 billion euros in sales from cloud computing by 2017 out of a total of at least 22 billion, but McDermott said that SAP will raise the outlook after completion of the Concur acquisition.

Concur's revenue for the fiscal third quarter ended in June rose 28.6 pct to $178.37 million.

The Concur board of directors has unanimously approved the transaction, which is expected to close in the fourth quarter of 2014 or the first quarter 2015, subject to shareholder and regulatory approvals, SAP said.

The acquisition would be funded from a credit facility agreement of up to 7 billion euros, SAP said, which was advised by Deutsche Bank. Concur was advised by boutique bank Qatalyst.

(Additional reporting by Eric Auchard; Editing by David Gregorio and Cynthia Osterman)