Updated: SAP buys Business Objects for £3.3bn

In a move to jump-start growth in the business intelligence arena, SAP will acquire Business Objects for about €4.8bn (£3.32bn).

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In a move to jump-start growth in the business intelligence arena, SAP will acquire Business Objects for about €4.8bn (£3.32bn).

The German enterprise resource planning (ERP) vendor announced on Sunday night that it plans to combine its software offering with the French business intelligence (BI) vendor's products to offer their customers real-time information about their businesses.

Acquiring Business Objects will allow it to move into the BI market, and offer integrated software, far faster than through co-innovation, said SAP CEO Henning Kagermann during a conference call with journalists.

The two companies' boards agreed to the deal on Sunday, said Kagermann.

"Customers have demanded an integrated, end-to-end business process landscape," Kagermann said. "The biggest driver was definitely growing new business."

There is little overlap between the two companies, Kagermann said.

"There are opportunities on the top line so that we won't need heavy restructuring," he said.

Business Objects will continue to operate separately from its new parent, the companies said.

"We will operate as a stand-alone entity within the SAP Group," said Business Objects CEO John Schwarz, speaking from SAP's headquarters in Walldorf, Germany.

But Business Objects will tie its software more closely to SAP's products in a future version, Schwarz said.

"This business intelligence solution will be available in a more integrated fashion for the SAP customer, and in a stand-alone manner for the non-SAP customer," Schwarz said.

SAP's business software rival Oracle recently bought another BI vendor, Hyperion.

Schwarz said SAP and Business Objects' combined reach through resellers to midmarket companies will help them compete effectively.

"Together we have almost 5,000 business partners. I think it will be a formidable force as we put our solutions together," he said.

SAP extended its reach into the mid-market last month with the launch of a suite of hosted ERP software called SAP Business ByDesign.

When asked on the conference call when the companies will be able to offer integrated software, Kagermann pleaded for time.

"Give us a little time, please. This is not a finalised transaction. Until it is closed both companies will plan how to do it and talk."

SAP offered €42 (£29) per Business Objects share, a 20% premium over the Friday night closing price of €35 (£24) on the Euronext stock exchange. SAP will make parallel cash offers in France and the US, where Business Objects has dual headquarters, and expects to close the deal in the first quarter of 2008, subject to regulatory approval.

Analyst group Ovum said two issues that arose in the acquisition were the "conflict with its existing BI capabilities and its relationship with other BI vendors".

It said SAP's own BI platform (SAP Netweaver BI) competed with BI vendors in around 30% of deals, but SAP had also been operating in a landscape of 'co-opetition' with the leading BI vendors - including Business Objects - to complement and broaden the reach of Netweaver BI.

Ovum added: "There are huge areas of overlap between the product sets. We expect any soon-to-be-announced integration plans to detail the areas for rationalisation and the product roadmap moving forward. How well it can carry on 'playing nicely' with competing BI vendors after it acquires Business Objects remains to be seen, but we think it will have no choice but to try."

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