Sage Group PLC (LON:SGE) was the biggest FTSE 100 faller this morning after the accounting software group unveiled plans - after the market close yesterday - to acquire US cloud financial management services provider Intacct Corp for US$850mln.
In mid-morning trading, Sage shares were 4%, or 28.5p lower at 672.0p.
The blue chip group – which in June announced the sale of its North American payments business to private equity firm GTCR LLC for US$260mln - said the total consideration for Intacct will be paid in cash and rolled-over options, and the deal is expected to complete within weeks, subject to customary completion conditions.
Sage pointed out that the California-headquartered business has grown revenue over the last three years at a compound annual growth rate of 33%, and current recurring revenue stands at around US$96mln on an annualised basis.
In a statement, the UK-based firm said: "The acquisition demonstrates Sage's strong affirmation to winning in the cloud, winning in the US and accelerates the strategy underpinned by Sage's five strategic pillars.”
However, in a note to clients today commenting on the acquisition, analysts at Barclays Capital said: “Two years into its transformation plan, growth has not improved for Sage and, with the £654mln acquisition of US cloud accounting vendor Intacct, it appears Sage is indeed moving to Plan B.”
They added: “In the long term this may well be the necessary acceptance that its existing business is simply behind in the cloud, however, in the near term it is another dilutive deal (following the US payments disposal) and it also confirms a change in direction from the transformation plan put in place two years ago.”
Sage reconfirms full-year guidance
Aside from the big US acquisition, Sage also issued a trading update after-hours yesterday, which showed organic revenue rose by 6.3% in the third quarter to the end of June, resulting in growth of 6.4% for the first nine months of the current financial year.
The group also reconfirmed its current full-year guidance for at least 6% organic revenue growth “including the contribution from North American Payments through to completion of the disposal and an underlying operating margin of at least 27%.”
The firm said, in addition to organic revenue, it expects Intacct - to be named Sage Intacct - Sage People and Compass to add £20mln of revenue "in this financial year".
Sage said it organic recurring revenue in the first nine months of the financial year grew by 9.3%, boosted by increased subscriptions for its software, which soared by over 30%.
However, organic software and software related services revenue declined by 5.9% in the first nine month period reflecting a continuing planned migration to subscriptions as part of its strategy.