SAP Slips After $5.8 Billion Sybase Offer

Shares in software company SAP AG (SAP) traded lower in Frankfurt Thursday after its $5.8 billion cash bid for Sybase Inc. (SY), amid concerns over the high price tag.

SAP has agreed to pay $65 per Sybase share, a 56% premium to Tuesday's closing price.

SAP's offer for Dublin, California-based Sybase comes as SAP struggles to outpace rival Oracle Corp. (ORCL) and after the recession sharply clipped earnings, with many businesses opting to put off investments. SAP makes software that businesses use for tasks such as accounts and managing inventory.

The deal "isn't exactly a bargain," said Cheuvreux analysts. However, they noted it does offer SAP a wider customer base, especially in Asia where mobile devices play a larger role in business, and it could become a growth engine for the company.

Sybase is particularly attractive for SAP not only because of its database software, which will make it less reliant on reselling Oracle products, but also because of its leading position in new growth technologies such as mobile applications.

The two companies already work together after SAP last year agreed to use Sybase to build all of its mobile applications. In March SAP released an application that lets mobile workers on the move, using devices such as Apple Inc's (AAPL) iPhone and Resarch in Motion Ltd.'s (RIMM) Blackberry, respond to alerts and complete tasks like time recording and travel requests through an email inbox.

At 1118 GMT, SAP shares traded down 1.7% at EUR35.43, recouping some lost territory after the shares fell as low as EUR35.08 Thursday. The overall DAX was trading up 0.9%. The bourse was open despite a public holiday in Germany and much of Europe.

People familiar with the situation said SAP agreed to a EUR2.75 billion loan to back the purchase and is financing the deal with a mixture of cash and debt. Deutsche Bank and Barclays Capital are arranging the debt financing. It is unclear as yet whether the loan will be syndicated to a wider group of banks

SAP co-chief executive Bill McDermott in a conference call Thursday confirmed that talks on the acquisition began as recently as March.

"With this acquisition we open our business applications to several hundred million mobile users," McDermott said Wednesday.

The acquisition is the biggest since SAP's purchase of Business Objects in early 2008 for around EUR4.8 billion.

-By Frankfurt Bureau, Dow Jones Newswires; +49 69 29725 500; djnews.frankfurt@dowjones.com

(Philipp Grontzki, and Carol Dean in London contributed to this article.)

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