They're calling it a "friendly takeover," but SAP's announcement that it will buy rival IT firm Business Objects has some analysts scratching their heads.
The two major players in the global healthcare IT industry will merge as a result of SAP AG's Oct. 8 cash offer of €42 per ordinary share of Business Objects SA. The total cost of the acquisition will be about €4.8 billion ($6.8 billion) and, pending certain regulatory requirements and shareholder approval, is expected to close in early 2008.
Paris-based Business Objects will add significantly to SAP's global market presence. The Walldorf, Germany-based company currently provides its business software, including the NetWeaver enterprise SOA platform, to some 41,000 clients in 120 countries. NetWeaver is used in healthcare facilities for processes such as patient and benefits administration.
Business Objects provides business intelligence software to roughly 44,000 customers. The company will operate as an independent firm under the SAP Group.
Analysts have been quick to question the deal. SAP's per-share offer is roughly 20 percent higher than Business Object's closing share price on Oct. 5, according to BBC News. SAP's stock fell 5 percent after the announcement.
Merck Fink analyst Theo Kitz told BBC that the move contradicts SAP's strategy "to pursue organic growth with only small fill-in acquisitions," and he contends the move will strain SAP financials in 2008.
"Together, SAP and Business Objects intend to offer high-value solutions for process- and business-oriented professionals," the companies said in a joint press release.
Analysts estimate that the combined market share of the two companies is at least 50 percent larger than the next largest competitor in the field of business intelligence and analytics, SAP executives said in an investor meeting.
"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 Henning Kagermann, chief executive of SAP AG.
The Business Objects board of directors has approved the deal and will seek shareholder approval following regulatory review.