Callidus Software Hit With Downgrade After SAP Buyout

Enterprise software and SaaS name Callidus Software Inc. (NASDAQ: CALD) announced an agreement Jan. 29 to be bought out by SAP SE (ADR) (NYSE: SAP)'s American unit.

The Analyst

B. Riley FBR analyst Kevin Liu downgraded Callidus Software from Buy to Neutral and increased the price target from $28 to $36, to match the acquisition price.

The Thesis

SAP has agreed to pay $36 in cash for each Callidus share, resulting in a total enterprise value of $2.4 billion, Liu said in a Wednesday note. The deal price reflects a 10-percent premium over the closing price on Jan. 29 and a 21-percent premium over the 30-day volume weighted average price per share, according to B. Riley. 

The valuation suggested by the transaction price is a favorable outcome for the company's shareholders, the analyst said. The deal represents a premium to what rival Xactly Corp (NYSE: XTLY) fetched when it sold itself to Vista Equity Partners.

"In regards to the potential for a higher bid, we surmise that other strategic vendors like salesforce.com, inc. (NYSE: CRM) or Oracle Corporation (NYSE: ORCL) have had ample opportunity to pursue CALD, and the final purchase price suggests a thorough process," Liu said. 

At this juncture, B. Riley does not see the possibility of a rival offer emerging.

Callidus Software is scheduled to release its fourth-quarter results after the market close Feb. 8, with the company expecting pro forma EPS of11-12 cents on revenues of $65 million to $66 million.

The Price Action

Shares of Callidus Software were up about 79 percent over the year up until the announcement of the deal.

Shares were up 0.28 percent at $36.05 at the time of publication Wednesday afternoon. 

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