Frankfurt: SAP AG, largest maker of enterprise-applications software, agreed to buy Ariba Inc for $4.3 billion (Dh15.8 billion) in the German company's second multi-billion purchase in cloud computing to take on Oracle Corp.

SAP will pay $45 a share, or 20 per cent more than Ariba's Monday closing price, Walldorf, Germany-based SAP said on Tuesday. The transaction, subject to approval by Ariba shareholders and regulators, will probably be completed by the end of August, SAP chief financial officer Werner Brandt said on a conference call.

Ariba is the leader in cloud-based collaborative commerce applications, with BHP Billiton Ltd and Deutsche Bank AG among those it connects to more than 730,000 suppliers.

As competition in on-demand software intensifies, SAP has increased acquisitions, last buying SuccessFactors Inc in December.

Strategic player

With businesses increasingly choosing to store and process data online, SAP is shifting many of its staple applications to the internet.

"We don't have the DNA in the cloud," SAP co-chief executive officer Bill McDermott said. "We're probably the most strategic cloud player in the enterprise software industry."

In more than 60 enterprise software takeovers since 2002, the median multiple buyers paid was about 16 times earnings before interest, taxes, depreciation and amortisation, according to data compiled by Bloomberg.

That compares with the 106 times trailing 12-month Ebitda SAP has offered for Ariba, the data show.

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

Applications

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

The market for cloud software delivered via the web will grow five times as quickly as sales of programs installed on clients' premises, according to researcher IDC. SAP plans to generate €2 billion (Dh9.3 billion) from such systems by 2015 to help it reach a sales target of more than €20 billion by that year.

While Oracle has snapped up rivals, SAP had traditionally shied away from large deals, with past CEO Leo Apotheker telling investors in 2009 that the company's home-grown software was superior to Oracle's.

McDermott and co-CEO Jim Hagemann Snabe changed that strategy as they race to take business from Oracle and others.

Rival bids could emerge

Frankfurt : SAP's acquisition of Ariba would be the largest enterprise software deal since Hewlett-Packard Co bought Autonomy Corp for more than $10 billion (Dh36.7 billion) last year, according to data compiled by Bloomberg.

There have been almost 1,200 of those transactions globally over the past decade, with a value topping $80 billion.

"There's potential for other bidders to emerge," said Richard Williams, an analyst at Cross Research, who has a hold rating on SAP. "There's a history of bidding wars between SAP and Oracle and this is exactly the kind of strategic company that would spark something like that."