SAP AG has agreed to acquire Sybase Inc. in a deal valued at $5.8 to beef up its mobile platform and help compete with arch-enemy Oracle Corp. The deal is an all-cash offer for Sybase shares at $65 per share.
Could you have spotted the deal coming? Yes. I’m a big fan of stock screens. Sybase was on the radar here at the Rayno Report after it started showing up on stock screens as being undervalued, with the screens singling it out for solid profit growth and a low P/E value. We cited it in early March on our shopping list of stocks to pick up after the February market swoon.
Another reason is that Fred Hickey, well-known technology stock analyst, was on top of the Sybase situation, calling it an undervalued company with buyout potential in this year’s Barron’s roundtable. Hickey has the hot hand, he also called out Novell for its large cash position just before it was picked up a bid from hedge fund Elliot Associates.
If you were sitting on shares of Sybase, there’s a huge premium. The deal price is 56 percent higher than the closing price of $41.57 yesterday. In after-hours trading stock last night, the stock was up 35 percent at about $56.
SAP cited Sybase’s position in the mobile market as a crucial element to the deal. “SAP, Sybase and their customers will be able to tap into Sybase’s messaging network to reach 4 billion mobile subscribers through 850+ operator relationships worldwide and engage their consumers via alerts, transactions and promotions on their mobile devices,” the company said in a press statement.
Sybase over the years has built an impressive position in the mobile space, supplying mobile analytics, messaging, and database tools to large enterprise and service provider customers. A crucial deal in this market was Sybase’s 2006 purchase of Mobile 365 for about $400M. In early 2009 it bought paybox Solutions AG for mobile payment technology. It frequently claims to be the number-one provider software and services company focused on “mobile information tools.”
The deal marks an interesting end to Sybase as an independent company. Founded in 1984, Sybase was initially a major player in the database industry, and was actually the originator of the software code that eventually became Microsoft’s SQL Server database product. Originally the two companies had operated with a software code and revenue sharing agreement, but that relationship broke down and Sybase went back to selling it’s own version of a SQL database server. Microsoft purchased the Windows flavor of SQL in 1993. Sybase lost market share in the database market in the late 1990s under competitive pressures and became a turnaround story.
It wasn’t until the early 2000s that Sybase came back to life with its new mobile strategy, which resulted in a return to solid profit growth and success on the back of mobile markets. The huge deal with SAG closes the books on a legendary Silicon Valley database company.