Silver Lake makes $2.4bn offer to acquire German multinational Software AG
Offer follows 2021 investment of €344 million in Software AG's convertible bond
Silver Lake Management, a private equity firm, has made a striking offer to acquire Software AG, a German multinational software company, in a deal that values the firm at €2.2 billion ($2.42 billion).
The offer price of €30 per share in cash marks a premium of 53% to Software AG's closing price of €19.59 on Thursday, making it a lucrative deal for the company's shareholders. In a statement, Software AG said that the supervisory and management boards of the company are in full support of the offer, signifying a positive outlook for the potential acquisition.
Back in February 2022, Silver Lake made a significant investment of €344 million in Software AG's convertible bond, which upon conversion would represent almost 9% of the issued shares of the company. This move showcased Silver Lake's confidence in Software AG's potential, setting the stage for a potential partnership.
The Software AG Foundation, an independent charitable foundation which holds the largest stake in the company, has declared its support for the offer.
The Foundation has signed a share purchase agreement with Silver Lake, agreeing to sell 25.1% of all shares to the private equity firm. The Foundation will continue to hold 5% of the company's shares, which will be subject to a lock-up.
According Software AG, the offer made by Silver Lake is subject to certain conditions, including regulatory clearances and an acceptance threshold of 50% plus one share. These conditions are standard in such transactions and ensure that the acquisition complies with all relevant laws and regulations.
The transaction is fully funded, with both equity and debt financing already in place and Software AG has expressed its intention to recommend the offer to the company's shareholders.
Founded in 1969 by six consultants in Germany, Software AG is publicly traded on the Frankfurt Stock Exchange.
Today, Software AG has a global presence, with a workforce of approximately 5,000 employees spread across more than 70 countries. With an annual Group revenue of over €950 million, the company is a major player in global technology.
It's high-profile customers include Tesco, Airbus, the United States Army, Australia Post, and German industrial conglomerate Siemens.
Silver Lake is a major player in the private equity industry, with a total asset value of $92 billion. The firm has a strong track record of successful investments across a wide range of sectors, including the software industry.
One such deal involved the acquisition of Qualtrics, a leading user experience and survey platform, from enterprise application company SAP for $12.5 billion.
Software AG has credited Silver Lake with providing significant support for the company's strategic focus on the cloud application and data integration market, as well as its transition to a SaaS-first business model.
"Silver Lake's proven expertise in all three of these areas in particular has accelerated the Company's strategic transformation progress and positions it as the ideal partner for the next phase of Software AG's multi-year transformation amidst a challenging macroeconomic environment and considering the required operational and financial long-term investments," the German company said.
According to Sanjay Brahmawar, the CEO of Software AG, Silver Lake is "a valuable long term partner for Software AG and our customers."
On Monday, Software AG saw its shares surge by nearly 50% following news of the Silver Lake offer.
In response to this development, Sanjay Brahmawar expressed optimism about the future, stating that Software AG is now expecting to achieve an operating profit margin in the upper range of 25%-30% over the medium term. This represents a notable shift in expectations, as this target was originally set for 2023 but has now been pushed forwards.