SAP AG's North American subsidiary, SAP America Inc., has signed a merger agreement with Retek, a best-of-breed software vendor that sells a retail industry-specific application suite.
SAP has agreed to purchase the company for about $496 million. Under the deal, SAP will make a tender offer of $8.50 for each Retek share, representing a 42% premium to its closing price of $6 on Friday.
The Retek board of directors has approved the merger and recommended to stockholders that they accept the offer.
The acquisition marks a renewed interest in the retail industry for SAP. Many retailers have their own proprietary software or use best-of-breed vendors and SAP has struggled to gain market share there in recent years, said Mike Dominy, a senior analyst with Boston-based Yankee Group.
"SAP has been much more successful moving from one manufacturing industry to another manufacturing industry because there are many more common core set of attributes there," Dominy said. "This is a good acquisition for SAP, because it gives them a significant increase in market share and represents a renewed interest in being a major player in that industry."
Minneapolis-based Retek has about 200 customers in more than 20 countries around the world. Its 2004 annual revenue was $174.2 million. The company's 525 employees are based in offices in Atlanta, London and Melbourne, Australia.
Retek's customers are among the largest retailers in the United States, including Best Buy Co., Gap Inc., and Office Depot Inc.
SAP said the retail industry is entering a new phase of packaged software adoption, as retailers are under increased pressure from competitors to lower costs and increase revenues.
In a joint conference call for investors and financial analysts, SAP executives said it is too early to discuss how Retek technology would be integrated into SAP's retail software offerings.
"With Retek, we are buying a company with almost 20 years of retail knowledge," said Leo Apotheker, president of SAP's global field operations and a member of the SAP executive board. "We have been building our retail presence for along time and, we see this as our increased penetration into a growing customer base."
The deal between Retek and SAP is also a blow to Oracle Corp., according to analysts, because Retek built its retail software products on the Oracle technology stack.
"We have had a strong relationship around the Oracle set of products," said Marty Leestma, president and CEO of Retek. "A lot of our traditional [offerings] is with Oracle, but we've invested a significant amount of money into building open systems using Java, and combining that with NetWeaver won't be a significant task."