Software AG mounts tender offer for IDS Scheer Staff

Software AG this week made an offer to buy IDS Scheer, which specializes in Business Process Management (BPM). Software AG said it signed a contract with founder August-Wilhelm Scheer and former managing director Alexander Pocsay, relating to the sale of over 15 million shares (about 48%) of IDS Scheer AG stock.

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Organic growth is something you always have to show. But in this very fast moving world we said we need to speed up with the vertical business.
Peter Kuerpick
Software AG
The sale of shares will be part of a voluntary public tender offer by SAG Beteiligungs GmbH, a wholly-owned subsidiary of Software AG, starting in the current quarter. In a statement, Darmstadt, Germany-based Software AG said it will offer €15 in cash per outstanding share of IDS Scheer capital. This represents a 28 percent premium over IDS Scheer's prior share value of €10.80.

Dr. Peter Kuerpick, chief product officer at Software AG, said Scheer and Pocsay's shares sold for about $320 million. The offer totaled about €490 million ($686 million as of Monday's Euro price) for IDS Scheer's more than 30 million outstanding shares.

Based in Saarbrücken, Germany, IDS Scheer is a major force in Business Process Management and Business Process Modeling, with widely deployed flagship ARIS modeling tools. If completed, the move to buy IDS Scheer would significantly enhance Software AG's position in BPM. A major strength for IDS Scheer has been a strong presence in SAP shops. Of late, IDS Scheer reported losses and restructured its workforce.

Like other enterprise middleware vendors, Software AG has looked in recent months to expand BPM offerings. Software AG estimates that a merger with IDS Scheer would create a company with more than $1.4 billion in annual sales and 10,000 customers.

The two companies had been involved in a three-year partnership before the offer was made. Kuerpick said buying IDS Scheer was the next logical move and would strengthen its integration into Software AG's SOA and BPM suite, webMethods 8.0.

"Organic growth is something you always have to show," said Kuerpick. "But in this very fast moving world we said we need to speed up with the vertical business."

Kuerpick said IDS Scheer had always had a way of staying ahead of the curve when it comes to modeling business processes from the ground up. The company's specialized expertise was something Software AG desired to aid in the departure from its traditionally exclusive focus on horizontal markets.

Customers, like some banks, Kuerpick said, don't want to deal with a vendor that is just a technology provider. Many want to deal with companies that can take a shaping role in the business processes. This is what IDS Scheer brings to the table, he said.

"This was kind of the next step," Kuerpick said. "We were looking for a partner that had that vertical expertise."

"I think it makes sense for Software AG," Judith Hurwitz, president of research and consulting firm Hurwitz & Associates. "IDS Scheer is a good part provider in an overall strategy for a number of SOA companies. I think that they are a good fit for each other."

Coupled with its first release of webMethods since purchasing it for $550 million in 2007, this deal puts Software AG in a very strong position in SOA and BPM.

Related Software AG information
Software AG releases webMethods 8.0 with added BI service repository
Software AG buys webMethods in major SOA play
SOA runtime governance pacts for Software AG, others

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