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Software AG will acquire all outstanding common stock in SAGA Systems for $11.50 per SAGA Systems share in cash, for a total transaction value of approximately $360 million. SAGA Systems markets and services Software AG's products in North and South America, Japan and Israel.

In addition, SAGA Systems licenses and services its own enterprise application integration product, Sagavista. SAGA Systems is headquartered in Reston, Va. and employs nearly 800 people. In the 12 months ended Sept. 30, 2000, SAGA Systems had revenues of $196 million.

"We are extremely pleased to announce the acquisition of SAGA Systems," Dr. Erwin Konigs, CEO, Software AG, said. "The territories where SAGA Systems operates are of utmost importance to Software AG. It makes great strategic sense for Software AG to gain direct control of our business in North and South America, Japan and Israel, and to offer our customers a superior platform for all our electronic business technology and services offerings.

The transaction will enable Software AG to enhance its position as one of the largest global software companies and is an important milestone towards our goal of becoming the world leader in electronic business enabling software based on XML technology.""We have grown SAGA Systems from a $157 million revenue business in 1996 to just over $196 million for the last 12 months ended Sept. 30, 2000. During this period, we took SAGA Systems public, created Sagavista, an enterprise application integration product, and built up a very profitable business," Dan Gillis, CEO, SAGA Systems, said. "We now believe that it is in the best interest of our shareholders, customers and employees to be unified under common ownership with Software AG and are very pleased to announce and recommend this transaction."

Compelling Strategic Rationale with the acquisition of SAGA, Software AG will gain direct access to the large customer base in North and South America, Japan and Israel. The combined sales force will provide Software AG with a powerful platform for accelerating growth of its world class electronic business products in the North American market.North America is the single largest information technology market in the world and it is a key priority for Software AG to expand significantly its presence there. The U.S. leads the market for B2B e-commerce and XML technologies in which Software AG is a pioneering force.

In the U.S., Software AG currently sells its electronic business products such as Tamino, the award winning native XML database for e-business applications, through Software AG Inc., a recently founded California-based subsidiary. SAGA has a strong distribution and service platform in North America with intimate knowledge of customer requirements and long-standing relationships. Software AG will use the strong cash flow from SAGA's core business to achieve rapid penetration of Software AG's new electronic business products in the North American market. As has been Software AG's experience in the European market, the new North American operation is expected to win major reference customers for Software AG's XML product line.

Software AG's electronic business products have boosted revenue growth by more than 100% year on year, increasing from almost no revenue in 1998 to over 30% share of license revenue in the most recent quarter. Software AG will implement its highly successful sales and marketing strategy worldwide and establish the foundation for continued strong growth with SAGA Systems. The acquisition gives Software AG full access to the other markets of the NAFTA zone, Canada and Mexico as well as to the markets of South America and Israel.

Japan, the largest Internet and IT market in Asia, is also an important part of the acquisition. Software AG's flagship product, Tamino, has recently won several awards in Asia. "Given Japan's advanced developments in Internet applications and mobile commerce, we see significant opportunities to penetrate the Japanese market with Tamino by working closely with our Japanese distribution partner," Dr. Konigs said.In combination with Software AG's indirect sales channel strategy, which successfully attracted major U.S. partners to promote its cutting-edge XML product line, North America should become the leading market for sales of Software AG's electronic business products within a short time. The transaction therefore marks a major breakthrough for Software AG's worldwide growth strategy.

Software AG will combine the North American operations of Software AG and SAGA Systems into a single operating unit. Software AG, with its new headquarters in Reston, Va., and a major branch office in San Ramon, Calif., will be present in 14 major business locations across the U.S. Software AG expects to incur a one-time cost of up to Euro 20 million in 2001. The transaction is expected to significantly enhance revenue and earnings to Software AG, excluding one-time costs.To ensure seamless integration, Software AG will make appropriate management retention arrangements for key SAGA Systems management and employees.

Under the terms of the merger agreement, each stockholder of SAGA Systems will receive $11.50 in cash per share of common stock. Thayer Capital will receive a one year note equal to a principal amount of $11.50 per share in lieu of cash for approximately 65% of its common stock and cash for the remaining common stock. SAGA Systems' Board of Directors has unanimously approved the merger agreement subsequent to receiving a fairness opinion from its financial advisor that $11.50 per share of common stock was fair, from a financial point of view, to the stockholders of SAGA Systems. Software AG's Supervisory Board has also unanimously approved the merger agreement. The merger agreement is subject to customary terms and conditions, including the approval by SAGA's stockholders.

Thayer Capital and Dan Gillis, representing 37.3% of the outstanding shares of SAGA, have entered into a stockholders agreement with Software AG in which Thayer Capital and Dan Gillis agree to vote in favor of the merger. Software AG owns an additional 7.5% of the outstanding shares of SAGA and has agreed to vote in favor of the merger. The stockholders agreement terminates upon termination of the merger agreement. The acquisition of SAGA Systems is expected to close in Q1 2001.
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Title Annotation:Company Business and Marketing
Comment:SOFTWARE AG TO ACQUIRE SAGA FOR $360 MILLION.(Company Business and Marketing)
Publication:EDP Weekly's IT Monitor
Geographic Code:1USA
Date:Nov 6, 2000

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