SAP to Shift to European Corporation

ERP vendor adopts new legal status to speed decision-making.

SAP AG, the German business-management software maker, plans to turn itself into a European corporation to enable faster decision-making as it focuses on grabbing database customers from Oracle Corp.

SAP will ask shareholders to approve a change of its legal status from an Aktiengesellschaft to a Societas Europaea, or SE, at next year’s annual meeting, it said yesterday. One aim is to speed up decisions on the supervisory board, said a person familiar with the matter, who asked not to be named because the discussions are private.

The SE structure, already adopted by companies including BASF SE, Allianz SE and Puma SE, was created by the European Commission to simplify regulatory and legal requirements for companies with subsidiaries in more than one European country. Previously, multinationals had to follow each of the EU members’ own legal system where they had a subsidiary.

The change could pave the way for a leaner supervisory board. While SAP has 16 people on that governing body, Allianz and BASF each has 12 members.

The change “offers the possibility to optimize both the corporate governance structure and work of the corporate bodies of SAP,” the Walldorf, Germany-based company said in a statement.

The change is of particular interest to German companies as the SE status allows them to choose between the German two-tier system of management board and supervisory board and the single-tier system adopted elsewhere in Europe with only one board. The legal form also simplifies cross-border mergers and acquisitions.

The move also reflects the growing internationalization of SAP’s business. The German market last year made up 15 percent of SAP’s revenue, compared with 19 percent in 2009, according to data compiled by Bloomberg.

SAP’s executive board, led by co-Chief Executive Officers Bill McDermott and Jim Hagemann Snabe, will begin negotiating with European employee representatives on how to tie them into the new governance structure, SAP said.

The company, which has overtaken Siemens AG and Volkswagen AG to become Germany’s most valuable company, yesterday proposed to lift its 2012 dividend to 85 euro cents from 75 cents a year earlier, when SAP also announced a special dividend to commemorate its 40th anniversary. Analysts estimate that SAP’s net income will reach 3.7 billion euros ($4.8 billion) this year, more than double the 2010 figure, data compiled by Bloomberg showed.

The world’s largest enterprise software maker is betting on Web-based software, programs for mobile devices and its homegrown database Hana to help grow beyond 20 billion euros in revenue by 2015. SAP reported 2012 sales of 16.2 billion euros.

SAP shares fell 1.2 percent to 62.23 euros at 10:10 a.m. in Frankfurt, valuing the company at 76.5 billion euros.

Oracle, based in Redwood City, California, on March 20 reported profit that missed analysts’ estimates as sales from hardware and new software licenses fell.


Bloomberg News

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