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SAP Expands Cloud Offerings With Acquisition of Ariba

SAP Acquires Ariba for $4.3 Billion

SAP AG (NYSE: SAP) today said it would acquire cloud-based business commerce solutions provider, Ariba, Inc. for approximately $4.3 billion.

The German software giant said that its subsidiary, SAP America, Inc., has entered into an agreement to acquire Ariba for $45.00 per share.

According to the company, the acquisition will combine Ariba's buyer-seller collaboration network with SAP's existing offerings to create “new models for business-to-business collaboration in the cloud.”

SAP LogoSAP says its entry into the "inter-enterprise business network space" significantly expands its growth opportunities and accelerates its momentum in the cloud. Last week, the company announced the roadmap for its cloud applications business (Software-as-a-Service), focusing on managing customers, suppliers, employees, and financials, in addition to its cloud suite offerings SAP Business ByDesign and SAP Business One. The acquisition will also significantly boost SAP's cloud applications portfolio with the addition of Ariba's cloud-based procurement solutions.

Headquartered in Sunnyvale, California, Ariba has approximately 2,600 employees. The company provides cloud-based commerce applications and offers a web-based trading community to help companies discover, connect and collaborate with a global network of partners.

In 2011, Ariba had $444 million in total revenue and experienced a 38.5 percent annual growth rate. Its business network recorded 62 percent organic growth in the same period. Ariba claims that its network is responsible for connecting and automating more than $319 billion in commerce transactions, collaborations, and intelligence among more than 730,000 companies. With a customer base of more than 190,000 companies, SAP's includes the largest buyers and sellers in the world, offering great potential to increase the number of participants, as well as the volume and types of transactions conducted through this network.

Here’s what SAP and Ariba says the combination will bring to the table:

• Together, SAP and Ariba can deliver an end-to-end solution that enables companies to achieve a closed-loop from source-to-pay, regardless of whether they deploy in the cloud, on-premise or through a combination of both.

• Ariba's open network and SAP's integration expertise will facilitate participation and extend the benefits of business collaboration to all companies, on any system, from any provider.

• The Ariba network will benefit from the performance delivered by using SAP's flagship in-memory platform SAP HANA.

• Relationship and transaction information from commerce activity in the Ariba network together with SAP's analytics will provide real-time insights to enable trading partners to discover, connect and collaborate more effectively.

• All SAP customers will be able to connect to the business network through pre-built integration points.

• Through the combination of the business network procurement solutions from Ariba and SAP, organizations can gain 360-degree business intelligence and effectively demonstrate that spending activities, contracts, and supplier interactions adhere to corporate compliance guidelines.

"The cloud has profoundly changed the way people interact. The impact will be even greater as enterprises connect and collaborate in new ways with their global networks of customers and partners," said SAP Co-CEOs Bill McDermott and Jim Hagemann Snabe. "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."

The Ariba brand will stay, the company said, and after the transactions closes, all cloud-related supplier assets of SAP will be rolled under Ariba, with the existing management team continuing to lead the operation under the name "Ariba, an SAP company."

Additionally, SAP’s Board plans to nominate Ariba CEO Bob Calderoni to the SAP Global Managing Board after the acquisition is complete.

SAP said the deal would be funded through its free cash and a €2.4 billion term loan facility, and is expected to close in the third quarter of 2012, subject to customary closing conditions.

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