SAP AG, largest maker of enterprise-applications software,agreed to buy Ariba Inc. for $4.3 billion in the German company'ssecond multi-billion purchase in cloud computing to take on OracleCorp.

SAP will pay $45 a share, or 20 percent more than Ariba's May 21closing price, Walldorf, Germany-based SAP said yesterday. Thetransaction, subject to approval by Ariba shareholders andregulators, will probably be completed by the end of August, SAPChief Financial Officer Werner Brandt said on a conferencecall.

Ariba is the leader in cloud-based collaborative commerceapplications, counting BHP Billiton Ltd. and Deutsche Bank AG amongcustomers it connects to more than 730,000 suppliers. Ascompetition in on-demand software intensifies, SAP has increasedits pace of acquisitions, last buying SuccessFactors Inc. inDecember. With businesses increasingly choosing to store andprocess data on the Web, SAP is shifting many of its stapleapplications to the Internet.

“We don't have the DNA in the cloud,” SAP co-Chief ExecutiveOfficer Bill McDermott said in an interview. “We're probably themost strategic cloud player in the enterprise softwareindustry.”

SAP fell 1.12 euros, or 2.3 percent, to 46.69 euros at 9:35 a.m.in Frankfurt. Ariba jumped 19 percent to $44.87 at yesterday'sclose in New York.

In more than 60 enterprise software takeovers since 2002, themedian multiple buyers paid was about 16 times earnings beforeinterest, taxes, depreciation and amortization, according to datacompiled by Bloomberg. That compares with the 106 times trailing12-month Ebitda SAP has offered for Ariba, the data show.

Sunnyvale, California-based Ariba's Ebitda is projected to morethan quadruple to $125 million in the 12 months through September,according to analyst estimates compiled by Bloomberg.

SAP's acquisition of Ariba would be the largest enterprisesoftware deal since Hewlett-Packard Co. bought Autonomy Corp. formore than $10 billion last year, according to data compiled byBloomberg. There have been almost 1,200 of those transactionsglobally over the past decade, with a value topping $80billion.

Counterbid?

“There's potential for other bidders to emerge,” said RichardWilliams, an analyst at Cross Research in Livingston, New Jersey,who has a hold rating on SAP. “There's a history of bidding warsbetween SAP and Oracle and this is exactly the kind of strategiccompany that would spark something like that.”

Deborah Hellinger, a spokeswoman for Oracle, didn't return aphone call seeking comment.

Ariba's global trading network connects and automates more than$319 billion in commercial transactions, collaborations, andintelligence among companies, according to SAP's statement. SAP'stools mostly serve internal business processes, and Ariba wouldgive the German company a way to automate business transactionswith outside companies and make it a stronger competitor incloud-based business networks, Williams said.

The deal will add to SAP's profit, excluding some items, in2013, Brandt said yesterday. Ariba CEO Robert Calderoni will joinSAP's global management board.

SAP bought SuccessFactors in December 2011 for $3.4 billion,adding a maker of online personnel-management applications to helpit enter the cloud-computing market. SAP is now offering itspayroll, supply-chain management and financial software as cloudapplications through the Internet.

The market for cloud software delivered via the Web will growfive times as quickly as sales of programs installed on clients'premises, according to researcher IDC. SAP plans to generate 2billion euros ($2.5 billion) from such systems by 2015 to help itreach a sales target of more than 20 billion euros by thatyear.

While Oracle has snapped up rivals, SAP had traditionally shiedaway from large deals, with past CEO Leo Apotheker tellinginvestors in 2009 that the company's home-grown software wassuperior to Oracle's. McDermott and co-CEO Jim Hagemann Snabe havechanged that strategy as they race to snatch business from Oracleand other companies such as Salesforce.com Inc. and Workday Inc. inthe cloud.

Hana Analytics

SAP bought Sybase Inc. for $5.8 billion in 2010 to bolster itsdatabase and mobile-computing offerings. It has also introduced adata-processing system called Hana, which competes with Oracle indatabase software.

This year, Oracle has purchased human-resources software makerTaleo Corp., a counterweight to SAP's acquisition ofSuccessFactors, and customer-service cloud-software vendor RightNowTechnologies Inc.

Ariba reported $444 million in revenue last year, an increase of39 percent from a year earlier. The U.S. company's board hasunanimously approved the deal, SAP said in the statement. SAP plansto fund the transaction with its own cash and a 2.4 billion-euroterm loan facility, the company said.

Ariba held its initial public offering in June 1999 and was oneof darlings of the Internet bubble, seeing its stock more thanquadruple in its first two months of trading. The shares plummetedabout 90 percent in 2001.

JPMorgan Chase & Co. and Deutsche Bank AG advised SAP on thedeal, while Morgan Stanley provided financial counsel to Ariba.

Bloomberg News

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