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Marc Benioff, Salesforce co-founder and co-CEO, gives the keynote address at Dreamforce 2017. (Salesforce Photo by Jakub Mosur Photography)

Salesforce will buy Tableau Software for $15.7 billion in an all-stock deal announced Monday morning, doubling down on data visualization and business intelligence with a deal for one of Seattle’s longest-running enterprise technology brands.

The all-stock deal would be the largest acquisition in the history of the San Francisco-based cloud giant, more than double the $6.5 billion Salesforce paid for MuleSoft last year. The acquisition comes just days after Google announced its the $2.6 billion acquisition of Looker, which makes business-intelligence software for data analysis.

MORE: Seattle will become Salesforce HQ2 via $15.7B Tableau deal, as Benioff gushes about talent pool

Tableau will remain based in Seattle and continue to operate independently under the Tableau brand, led by CEO Adam Selipsky, a former Amazon Web Services executive, Salesforce said in a news release announcing the deal.

“With Tableau, Seattle will become our second headquarters of Salesforce,” said Marc Benioff, Salesforce co-founder and co-CEO, on a conference call with analysts and investors. “It’s going to become our HQ2, if you will.”

He noted that Salesforce already employs more than 1,000 people in the Seattle region. Tableau employs more than 4,200 people worldwide.

“Tableau reminds me so much of Salesforce, and I’ve always connected with their mission,” Benioff said, citing potential integration with Salesforce’s AI technology, Einstein. “Tableau and Einstein bring together two pivotal platforms that every customer needs to understand their world.”

The deal promises to escalate the competition between Salesforce and Microsoft, which competes with Tableau through its Power BI data visualization and business intelligence technology. The Redmond-based tech giant already competes heavily with Salesforce’s core business with its Microsoft Dynamics customer relationship management technology.

The acquisition price of $15.7 billion is a premium of more than 45 percent over Tableau’s market value of $10.8 billion as of the previous stock market close. The deal is slated to close in the third quarter. The boards of both companies have approved the acquisition, according to the announcement.

Shares of Salesforce fell as much as 5 percent to $169.50 per share following the announcement, while Tableau stock rose more than 35 percent to $170 per share. Wedbush Securities analyst Steve Koenig told CNBC that investors may be concerned that Salesforce could be looking to acquisitions to fuel its growth rather than growing its business organically.

Salesforce provided this chart showing the key stats of the two companies in a slide deck detailing the deal.

Tableau was founded in 2003 based on technology spun out of Stanford. Co-founder Christian Chabot, the former Tableau CEO, explained in a 2011 interview with GeekWire that the company ended up in Seattle because he and his family decided they’d rather live here than in Silicon Valley.

In recent years, Tableau has been making the shift to a subscription-based business model, away from traditional software licensing. Selipsky, former head of sales and marketing at Amazon Web Services, took over as CEO from Chabot in 2016.

Tableau reported $1.16 billion in revenue for 2018, with a net loss of $77 million; compared with $877 million in revenue and a $185.6 million net loss in 2017.

Story updated with . News release follows.

Salesforce Signs Definitive Agreement to Acquire Tableau

SAN FRANCISCO and SEATTLEJune 10, 2019 /PRNewswire/ — Salesforce (NYSE:CRM), the global leader in CRM, and Tableau Software (NYSE: DATA), the leading analytics platform, have entered into a definitive agreement under which Salesforce will acquire Tableau in an all-stock transaction, pursuant to which each share of Tableau Class A and Class B common stock will be exchanged for 1.103 shares of Salesforce common stock, representing an enterprise value of $15.7 billion (net of cash), based on the trailing 3-day volume weighted average price of Salesforce’s shares as of June 7, 2019.

  • World’s #1 CRM and #1 analytics platform come together to supercharge customers’ digital transformations
  • Combination to accelerate Salesforce’s opportunity in the $1.8 trillion digital transformation space
  • Customers will be able to unlock even greater value from their data to drive smarter business decisions and more intelligent customer experiences
  • Tableau will be positioned to further its mission to help the world see and understand data

Comments on the News:

  • “We are bringing together the world’s #1 CRM with the #1 analytics platform. Tableau helps people see and understand data, and Salesforce helps people engage and understand customers. It’s truly the best of both worlds for our customers–bringing together two critical platforms that every customer needs to understand their world,” said Marc Benioff, Chairman and co-CEO, Salesforce. “I’m thrilled to welcome Adam and his team to Salesforce.”
  • “Salesforce’s incredible success has always been based on anticipating the needs of our customers and providing them the solutions they need to grow their businesses,” said Keith Block, co-CEO, Salesforce. “Data is the foundation of every digital transformation, and the addition of Tableau will accelerate our ability to deliver customer success by enabling a truly unified and powerful view across all of a customer’s data.”
  • “Joining forces with Salesforce will enhance our ability to help people everywhere see and understand data,” said Adam Selipsky, President and CEO of Tableau. “As part of the world’s #1 CRM company, Tableau’s intuitive and powerful analytics will enable millions more people to discover actionable insights across their entire organizations. I’m delighted that our companies share very similar cultures and a relentless focus on customer success. I look forward to working together in support of our customers and communities.”

Combination to Supercharge Digital Transformation

With Tableau, Salesforce will play an even greater role in driving digital transformation, enabling companies around the world to tap into data across their entire business and surface deeper insights to make smarter decisions, drive intelligent, connected customer experiences and accelerate innovation.

Companies of every size and industry are transforming how they do business in the digital age—customers and data are at the heart of those transformations. This creates an incredible opportunity for Salesforce and Tableau, as IDC projects worldwide spending on technologies and services that will enable digital transformation to reach $1.8 trillion in 2022.1

With Customer 360, only Salesforce can provide companies with a complete, intelligent view of their customers across every touchpoint—sales, service, marketing, commerce and more. Salesforce pioneered AI for CRM with Salesforce Einstein, and today delivers AI-powered analytics for sales and marketing.

With Tableau and Einstein together, Salesforce will deliver the most intelligent and intuitive analytics and visualization platform for every department and every user at any company. Tableau will make both Customer 360 and Salesforce’s analytics capabilities stronger than ever, and enable the company to reach a much broader set of customers and users.

Tableau to Scale and Further Its Mission as Part of Salesforce

Tableau pioneered self-service analytics with an intuitive analytics platform that empowers people of any skill level to work with data. More than 86,000 organizations around the world, such as Charles Schwab, Verizon, Schneider Electric, Southwest and Netflix, rely on Tableau to help them see and understand data.

As part of Salesforce, Tableau will be positioned to scale and further its mission to help people see and understand data. Following the acquisition close, Tableau will operate independently under the Tableau brand, driving forward a continued focus on its mission, customers and community. As part of the world’s #1 CRM company, Tableau will remain headquartered in Seattle, Wash. and will continue to be led by CEO Adam Selipsky and the current leadership team.

A Shared Commitment to Empowering Communities

Salesforce and Tableau share a deep commitment to empowering their communities, enabling people of every skill level to transform their businesses, their careers, and their lives through technology. Salesforce has a growing community of more than 1.4 million Trailblazers, and the Tableau Community consists of more than 1 million passionate data enthusiasts.Together, the two communities will represent the largest group of digital business experts in the world—millions of people understanding and transforming the world through data.

Details Regarding the Proposed Tableau Acquisition

Salesforce and Tableau have entered into a definitive agreement under which Salesforce will acquire Tableau in an all-stock transaction, pursuant to which each share of Tableau Class A and Class B common stock will be exchanged for 1.103 shares of Salesforce common stock, representing an enterprise value of $15.7 billion (net of cash), based on the trailing 3-day volume weighted average price of Salesforce’s shares as of June 7, 2019. The transaction is intended to be tax free for Tableau stockholders (except with respect to cash for fractional shares).

The transaction has been approved by the boards of directors of both companies.

Under the terms of the transaction, Salesforce will commence an exchange offer to acquire all of the outstanding shares of Tableau. The acquisition of Tableau is expected to be completed during Salesforce’s fiscal third quarter ending October 31, 2019, subject to customary closing conditions, including the tender by Tableau stockholders of shares representing a majority of the Tableau common stock voting power, assuming all shares tendered or converted will be counted on a one-vote-per-share basis, and the receipt of regulatory approvals. Christian ChabotPatrick Hanrahan and Christopher Stolte, the founders of Tableau, have all entered into an agreement with Salesforce in connection with the transaction, and have indicated that they intend to tender all of their shares in the exchange offer.

Financial Impact to Salesforce of the Proposed Tableau Acquisition

FY20 Revenue: The transaction is expected to increase Salesforce’s FY20 total revenue by approximately $350 million to $400 million. This estimate reflects a fair value adjustment to reduce unearned revenue and unbilled unearned revenue by approximately 30%, adjustments related to the combined customer base, and inter-company revenue elimination, as required by U.S. GAAP. FY20 Revenue is now expected to be $16.45 billion to $16.65 billion, an increase of 24% to 25% year-over-year.

FY20 non-GAAP operating margin: The transaction is expected to decrease Salesforce’s FY20 non-GAAP operating margin by approximately (75) basis points year-over-year.

FY20 non-GAAP EPS:  As discussed further below, guidance updates for GAAP EPS for all periods discussed are not currently available and Salesforce expects to provide the applicable updates when the transaction has closed and the purchase accounting has been completed. The acquisition is expected to decrease FY20 non-GAAP diluted EPS by approximately ($0.37) to ($0.39). FY20 Non-GAAP EPS is now expected to be $2.51 to $2.53. This estimate assumes fully diluted share count of approximately 900 million, and a non-GAAP tax rate of 22.5%.

FY20 Operating Cash Flow: Operating Cash Flow is now expected to be in the range of 21% to 22% year-over-year.

These estimates assume a close date on or about October 1, 2019, and certain assumptions related to non-GAAP tax rates. Actual results could differ materially based on the actual transaction close date. Salesforce is not currently able to prepare an accurate forecast for the full year impact of the acquisition on GAAP EPS and will not be able to do so until the purchase accounting is concluded after the transaction closes. The impact on GAAP EPS is expected to be more significant than for non-GAAP EPS due to the additional stock-based compensation charges and the impact of other various non-cash items, including amortization of acquisition-related intangibles and income tax adjustments.

Non-GAAP Financial Measures: This press release includes information about non-GAAP operating margin, non-GAAP EPS and non-GAAP tax rates (collectively the “non-GAAP financial measures”).  The primary purpose of using non-GAAP financial measures is to provide supplemental information that may prove useful to investors who wish to consider the impact of certain non-cash or non-recurring items on the company’s operating performance and to enable investors to evaluate the company’s results in the same way management does. Non-GAAP operating margin and non-GAAP EPS estimates exclude the impact of the following non-cash items: stock-based compensation, amortization of acquisition-related intangibles, as well as income tax adjustments. The non-GAAP tax rate estimate excludes the tax adjustments and tax consequences associated with the above excluded non-cash expense items.  The method used to produce non-GAAP financial measures is not computed according to U.S. generally accepted accounting principles and may differ from the methods used by other companies.  Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with the company’s consolidated financial statements prepared in accordance with GAAP.

Advisors

Bank of America Merrill Lynch is serving as exclusive financial advisor to Salesforce and Wachtell, Lipton, Rosen & Katz and Morrison & Foerster LLP are serving as legal counsel. Goldman Sachs & Co. LLC is serving as exclusive financial advisor to Tableau and Cooley LLP is serving as legal counsel.

Update, June 11, 2019: Percentage premium paid by Salesforce corrected since original post.

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