Salesforce acquires MuleSoft in expansion quest
NEW YORK: Salesforce Inc agreed on Tuesday to buy MuleSoft Inc for about $6.5 billion in its largest-ever acquisition, as the market leader in customer-relationship software makes an aggressive play for new products and corporate users.
San Francisco-based Salesforce is paying $36 in cash and 0.0711 shares of its common stock for each MuleSoft share, according to a statement. That’s 36% more than MuleSoft’s closing share price on Monday.
Salesforce said the $6.5 billion total price represented MuleSoft’s enterprise value.
Salesforce has tried to compete with larger rivals including Oracle Corp and Microsoft Corp by expanding its corporate software offerings.
Tuesday’s deal, scheduled to close by July 31, will give Salesforce access to MuleSoft’s 1,200 customers and the chance to sell them complementary products.
The company aims to double annual revenue by 2022.
MuleSoft expanded rapidly by helping companies like McDonald’s Corp and Coca-Cola Co connect applications, data sources and devices using in-house servers or public cloud providers.
“The success and integration of MuleSoft into Salesforce will be a strategic priority for us as we head toward $20 billion in sales,’’ Salesforce chief executive Marc Benioff wrote in an email to MuleSoft employees.
Salesforce shares dipped 2.2% in extended trading, after closing at $125.12 in New York on Tuesday. The company said it would pay for the cash part of the acquisition with existing funds and by borrowing $3 billion.
The transaction prompted Salesforce to increase its revenue goal for the fiscal year that ends Jan 31, 2022, by $1 billion, to $21 billion to $23 billion, according to a filing.
The company also said its operating profit margin wouldn’t improve as much as previously projected.
Adding MuleSoft may help mitigate a recent slowdown in Salesforce’s growth. The target company reported revenue growth of 58% last year and is on course to expand at about 40% in 2018, according to data compiled by Bloomberg.
Revenue from Salesforce’s existing business that helps companies build custom applications gained 37% — the biggest jump of any unit — to $536.3 million in the most-recent quarter.
Salesforce said MuleSoft would help it create an “Integration Cloud” service that combines the best of traditional in-house corporate computing with data and apps from the public internet.
A company may want to tap startup Stripe’s digital payments capabilities and combine that with Google Maps, plus some internal data and an older software program.
Pulling all that together into a custom application used to be a nightmare involving manually writing code, especially for non-tech companies. MuleSoft technology makes this easier.
Salesforce said companies would spend more than $4 billion writing integration software from scratch this year. “The broader market for this is worth as much as $30 billion a year,’’ it said.
“This is thinking about the next 10 years,” Salesforce chief operating officer Keith Block said on a call with analysts after the deal was announced. “We’re looking at the best asset in the marketplace and we’re very excited to have them join us.”
“The deal will also bolster Salesforce’s strategy of targeting specific sectors,’’ he said, including government agencies, health care and financial services.
“This acquisition will expand Salesforce. com’s Platform-as-a-Service portfolio of products,” said Anurag Rana, an analyst at Bloomberg Intelligence. “These platforms let companies easily build applications that suit their specific needs.’’