Adobe buys Magento in $1.7bn digital commerce deal - TechCentral

Adobe buys Magento in $1.7bn digital commerce deal

Adobe Systems has agreed to buy e-commerce company Magento for US$1.7bn in a bid to capture a bigger slice of the digital commerce industry from Salesforce.com and Oracle.

The Photoshop software provider is making its third-biggest acquisition to create an end-to-end system for designing digital ads, building e-commerce websites and other online customer experiences and completing transactions, the company said Monday in a statement.

Campbell, California-based Magento offers software to build and run Web stores, handle online purchases, shipping and returns. It also helps merchants sell products through social media ads and competes with Shopify. Magento technology supports more than $155bn in gross merchandise volume, and customers include Canon and Rosetta Stone. eBay sold Magento in 2015 and it has been backed by private equity firm Permira Holdings since then.

Adobe has sought to diversify from the digital media products that made it one of the world’s largest software companies. The deal is slightly smaller than Adobe’s 2009 purchase of Omniture, which made the company a player in digital advertising. The Magento purchase would see the company battle cloud-based commerce services from Salesforce, Oracle and SAP. This part of Adobe’s business, known as its Experience Cloud, generates less revenue and grows more slowly than its creative software offerings like Photoshop.

Adobe also announced an $8bn share buyback programme through to the 2021 financial year. The programme is expected to be funded from its future cash flow from operations and won’t have a material impact on the company’s earnings this fiscal year. It expands on the company’s current $2.5bn repurchase plan scheduled through to fiscal year 2019, Adobe said in a statement. The company’s shares rose about 1% in extended trading after closing at $238.10 in New York.

Permira made five times its initial stake of about $200m, said a person familiar with the matter. The investment was made out of its Permira V fund, said the person, who asked not to be identified because the information is private.

The deal for Magento is expected to close in the third quarter of Adobe’s financial year, pending regulatory approval. Adobe will gain access to Magento’s mid-market and large corporate customers, and gain a foothold in physical store and online transactions.

Magento CEO Mark Lavelle said the sale would accelerate his company’s commerce progress and reflected a shared vision between the two firms, which were partners before the transaction.

Magento rival Shopify fell as much as 5.5% in extended trading following the announcement.  — Reported by Nico Grant, with assistance from Alex Barinka and Jeran Wittenstein, (c) 2018 Bloomberg LP

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