Business Objects and Crystal Decisions announced a definitive agreement under which Business Objects will acquire privately held Crystal Decisions, the fastest-growing vendor in the business intelligence (BI) market, and the leading provider of enterprise reporting software.
Under the terms of the agreement, Business Objects will issue approximately 26.5 million shares of common stock in respect of outstanding Crystal Decisions common shares and stock options, which will represent approximately 29 percent of the combined company's shares. In addition, Crystal Decisions stockholders will receive an aggregate of $300 million in cash. Based on the closing price of Business Objects' stock on July 17, 2003 the transaction is valued at an aggregate purchase price of approximately $820 million.
This transaction joins two of the strongest-performing companies in enterprise software, with highly complementary products, distribution channels and talent pools.
The transaction is expected to be accretive to Business Objects' 2004 earnings even prior to considering the impact of expected revenue and cost synergies, but before purchase accounting adjustments. The companies expect to capitalize on significant growth opportunities resulting from complementary products, channels, and geographic presence. The companies also believe there are significant opportunities for operating cost synergies, which are expected to result in pre-tax savings of approximately $25 million for calendar year 2004.
Crystal Decisions leads the enterprise reporting segment of the BI market. The company is the fastest-growing vendor in the BI market, having achieved 30 percent annual growth in 2002. For the twelve months ended March 2003, Crystal Decisions' revenue was $270 million, with an operating margin of 14 percent.
Crystal Reports, the company's flagship product, has shipped over 14 million licenses and is the most widely used report authoring tool in the market. Crystal Decisions has one of the strongest partner programs in the BI industry with over 350 OEM relationships, including Hyperion, Microsoft, Peoplesoft, and SAP.
The combined company will give Business Objects:
- Business intelligence market leadership
- The strongest, most complete product line
- A powerful range of distribution channels
- Significant new growth opportunities
The combined company will have:
- More than 3800 total employees
- More than 500 quota-carrying salespeople
- More than 1000 customer-facing staff in technical support, education and professional services
- More than 700 alliance partners
- More than 16 million licenses
By combining the two companies' product lines, Business Objects will be able to meet the needs of all BI users and provide a strong product offering in all BI market categories. The combined product offering will be the strongest and most comprehensive available in the industry today.
Business Objects has long served the "power users" in organizations through its strong ad hoc query, reporting, and analysis capabilities. Business Objects has recently targeted executives with its new dashboard, scorecard, and enterprise performance management (EPM) capabilities, launched earlier this year. Crystal Decisions is the solution of choice for a very large population of report consumers throughout organizations. Together, the two companies will offer a broad product line that meets the needs of all types of enterprises and all types of users.
The combined company will benefit from unparalleled strength in distribution and will be able to leverage:
- Crystal Decisions' more than 350 OEM partners, including Hyperion, Microsoft, PeopleSoft, and SAP
- Crystal Decisions' reseller, distributor, and inside sales channels
- Both companies' enterprise sales organizations
- Business Objects' relationships with major systems integrators
Business Objects sees several immediate opportunities for growth:
- Product cross-sell. Cross-selling products between the respective companies' customer bases
- Geographic penetration. Leveraging respective geographic strengths, in particular, Business Objects' well established presence in Europe, where enterprise reporting is underpenetrated
The transaction is expected to close in the fourth calendar quarter of 2003, and is expected to be tax free to shareholders of both companies with respect to the stock consideration the shareholders receive. The transaction is subject to regulatory reviews and approvals, including under the Hart-Scott-Rodino Act; approval by the shareholders of Business Objects; and certain other customary conditions. Thomas Weisel Partners LLC acted as financial advisor to Business Objects. Goldman, Sachs & Co. acted as financial advisor to Crystal Decisions.
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