SAP Plans Qualtrics IPO Two Years After Record Deal

(Bloomberg) -- SAP SE said it will sell a stake in its Qualtrics customer-survey software unit through a U.S. public offering, less than two years after buying the firm to help compete with Salesforce Inc.SAP will keep a majority interest in Qualtrics while giving the business greater autonomy under existing managers including founder Ryan Smith, the Walldorf, Germany-based company said in a statement Sunday. Smith, who started Qualtrics with brother Jared in the basement of their parents’ home in Utah, will be the largest individual shareholder.“We will fully participate in Qualtrics’s growth potential as majority shareholder,” Chief Executive Officer Christian Klein said in a call on Monday. “We truly expect an IPO of Qualtrics will have all the ingredients to be well received by IPO investors.”SAP shares rose 2.5% in early trading on Tradegate from their Friday close of 135.64 euros in Frankfurt.The decision marks a quick turnaround from the $8 billion purchase of Qualtrics in November 2018, which received a lukewarm reception from investors who blanched at its price tag. Qualtrics was the capstone of former CEO Bill McDermott’s $26 billion shopping spree to help push the 48-year-old software giant into faster-growing cloud-based software and services. Klein must compete with younger companies, such as Salesforce.com and Workday Inc., while managing a shrinking legacy software business.An IPO could value Qualtrics at 10 billion euros ($11.7 billion) to 16 billion euros, according to Bloomberg Intelligence analysis.McDermott had defended the deal, believing that combining SAP’s workforce and a trove of operational data with Qualtrics’s customer experience feedback would accelerate growth. Qualtrics’s revenue rose 34% to 168 million euros in the second quarter from a year earlier, SAP said in a statement on Monday.Read more: SAP’s an Old Company With New Tricks in Battle to Dominate CloudThe timing of the IPO will be determined later, SAP said. As majority owner, the German company plans to continue to fully consolidate Qualtrics’s results and said there will be no effect on 2020 guidance.SAP on Monday also raised its outlook for free cash flow in 2020 to 4 billion euros from 3.5 billion euros previously. Operating cash flow will be above 5 billion euros, it said.The IPO isn’t part of SAP’s strategy to carve out non-core businesses, Chief Financial Officer Luka Mucic said on the call. The German technology giant may still pursue one or two more divestments, he added.(Updates with shares, Bloomberg Intelligence estimates starting in fourth paragraph. A previous version of this story was corrected to say that SAP will maintain a majority stake in the first deck headline.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P. Read More...

(Bloomberg) — SAP SE said it will sell a stake in its Qualtrics customer-survey software unit through a U.S. public offering, less than two years after buying the firm to help compete with Salesforce Inc.

SAP will keep a majority interest in Qualtrics while giving the business greater autonomy under existing managers including founder Ryan Smith, the Walldorf, Germany-based company said in a statement Sunday. Smith, who started Qualtrics with brother Jared in the basement of their parents’ home in Utah, will be the largest individual shareholder.

“We will fully participate in Qualtrics’s growth potential as majority shareholder,” Chief Executive Officer Christian Klein said in a call on Monday. “We truly expect an IPO of Qualtrics will have all the ingredients to be well received by IPO investors.”

SAP shares rose 2.5% in early trading on Tradegate from their Friday close of 135.64 euros in Frankfurt.

The decision marks a quick turnaround from the $8 billion purchase of Qualtrics in November 2018, which received a lukewarm reception from investors who blanched at its price tag. Qualtrics was the capstone of former CEO Bill McDermott’s $26 billion shopping spree to help push the 48-year-old software giant into faster-growing cloud-based software and services. Klein must compete with younger companies, such as Salesforce.com and Workday Inc., while managing a shrinking legacy software business.

An IPO could value Qualtrics at 10 billion euros ($11.7 billion) to 16 billion euros, according to Bloomberg Intelligence analysis.

McDermott had defended the deal, believing that combining SAP’s workforce and a trove of operational data with Qualtrics’s customer experience feedback would accelerate growth. Qualtrics’s revenue rose 34% to 168 million euros in the second quarter from a year earlier, SAP said in a statement on Monday.

Read more: SAP’s an Old Company With New Tricks in Battle to Dominate Cloud

The timing of the IPO will be determined later, SAP said. As majority owner, the German company plans to continue to fully consolidate Qualtrics’s results and said there will be no effect on 2020 guidance.

SAP on Monday also raised its outlook for free cash flow in 2020 to 4 billion euros from 3.5 billion euros previously. Operating cash flow will be above 5 billion euros, it said.

The IPO isn’t part of SAP’s strategy to carve out non-core businesses, Chief Financial Officer Luka Mucic said on the call. The German technology giant may still pursue one or two more divestments, he added.

(Updates with shares, Bloomberg Intelligence estimates starting in fourth paragraph. A previous version of this story was corrected to say that SAP will maintain a majority stake in the first deck headline.)

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