SAP AG said Wednesday it's agreed to buy Dublin, Calif.-based Sybase Inc. for roughly $5.8 billion, as the German software giant seeks to revamp its culture and compete more effectively with acquisitive rival Oracle Corp.
SAP said in a statement that it will make a tender offer for Sybase at $65 a share, a 44% premium over the shares' thee-month average price. Sybase shares have historically never traded above $55 a share on a split-adjusted basis, a mark they reached in 1994.
In after-hours trading, Sybase shares rose 15% to $64.65, while U.S.-traded shares of SAP fell nearly 1% to $44.50.
Shares of Sybase had surged earlier Wednesday, following a Bloomberg News report of the impending merger announcement.
SAP and Sybase said the deal will be made using SAP's cash on hand, and a 2.75 billion euro ($3.47 billion) loan facility. Sybase will operate as a standalone unit, and its management team will remain in place.
"This is huge," SAP co-CEO Bill McDermott said during a conference call, adding that the merger is "about accelerating growth for both businesses." With the acquisition, SAP is gaining mobile technology, and so-called "in-memory" database technology -- raising questions about how SAP will position it in relation to Oracle's database software.
While Sybase's board has approved the merger, and the companies expect the deal to close in July, analysts say competing bids for Sybase could yet emerge.
"There could be other bidders," said Cowen & Co. analyst Peter Goldmacher, though he added that Oracle is less likely to make an offer than others. "I always though H-P made sense" as a Sybase suitor, Goldmacher said, referring to Hewlett-Packard Co.
H-P recently bought Palm Inc., which has a mobile operating system that could be complementary to Sybase's mobile infrastructure, Goldmacher said.
McDermott had said in March that as SAP is looking to overhaul operations, it could seek to make significant acquisitions.
That was something of a departure for SAP, which had largely relied on internal growth, while rival Oracle has pursued a strategy of frequent, sizable acquisitions.
Altimeter Group analyst Ray Wang said SAP's purchase of Sybase "signals their seriousness to acquire key, innovative technologies."
Wang said that, in addition to mobile and database technology, SAP is also gaining "access to the financial services market in China," where Sybase has a significant presence.
Sybase has partnered with SAP in the past, to provide business software to mobile devices. That partnership was announced in March of last year.
"We wanted something much more serious," McDermott said.
SAP currently provides Oracle with a significant chunk of revenue, as it supports Oracle database software alongside its business software applications.
Longer-term, Wang said, that may be phased out, in favor of Sybase's technology -- which could lend SAP an extra edge in competition with Oracle.
"At some point, you need to put an end to that," Wang said.
However, McDermott cautioned that SAP's support for Oracle's database "should continue," adding, "We'll continue to support openness and choice."
Cowen's Goldmacher said SAP will likely have little choice but to continue supporting Oracle's database with its products. "Customers want Oracle," he said.
SAP surprised investors in February by announcing that former CEO Leo Apotheker was stepping aside after serving only seven months on the job.
SAP is now run by co-CEOs McDermott and Jim Hagemann Snabe, who have cited a need to change the company's culture and foster better execution.
The company has struggled to with its "Business ByDesign" product, an on-demand service aimed at mid-sized businesses that has experienced delays, for example.
SAP has also recently faced criticism of its decision in 2008, in the midst of a recession, to raise maintenance fees for customers.