SAP is filling out its functionality for the retail sector with the acquisition of Retek, one of the top vendors of retail management software.
Although SAP does not typically do big acquisitions, it does go after point solutions to build up its technology (e.g. its acquisition of TopTier a few years ago), or, in the case of Retek, to round out its offerings for specific industries. In acquiring Retek, SAP gets products that are deep in retail industry functionality, such as merchandising, multi-channel retailing, retail supply chain management, and demand planning. It also adds more than 200 customers in more than 20 countries to its customer base, including some big name retailers such as Tesco, Best Buy, Gap Inc., Sainsbury's, and Selfridges.
What's really interesting, though, is how rich SAP's offer is. SAP is offering $496M in cash for Retek, which is 2.8 times Retek's 2004 revenue--a pretty rich valuation. As of this writing, Retek shares are up a whopping 40% on the announcement, which shows just how far SAP's offer is above the market price for Retek.
So, why is SAP willing to pay so much for Retek? I think this is yet another response of SAP to Oracle's acquisition of PeopleSoft. PeopleSoft has pretty good penetration of the retail industry, including a partnership with JDA, a direct competitor to Retek. I suppose SAP could have gone after JDA, but it would have risked a bidding war with Oracle. So, Retek became the target.
There's more information in a press release on SAP's web site.
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