Sage snaps up Nasdaq-quoted software house

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The Independent Online

Sage, which sells accounting software to small and medium-sized businesses, was back on the acquisition trail yesterday having struck a deal to buy a Nasdaq-quoted software house.

Sage has agreed to pay £57.1m, or $8.25 a share, in cash for the Oregon-based company Timberline, which provides accounting and estimating software to small and medium-sized enterprises in the construction and property sectors.

"The acquisition of Timberline fits with our strategy of acquiring locally developed and locally supported market-leading software brands," Paul Walker, Sage's chief executive, said.

Shares in Sage closed down 5.35 per cent, or 10p, at 177p - making it the biggest faller in the FTSE 100 index yesterday. Analysts attributed the drop to cautious statements from other technology companies, including Misys, and nervousness ahead of figures from Microsoft.

The purchase price - a premium of 33.3 per cent to Timberline's closing share price on Wednesday - was described by some analysts as pricey, at 50 times last year's operating profits.

Analysts at Investec said, however, that Sage had an "outstanding" reputation for making small acquisitions and stripping out costs "so management may well consider this multiple irrelevant".

Timberline made an operating profit of £1.3m last year on sales of £38.4m. The deal is expected to complete by the middle of September.

Sage, which is financing the acquisition from existing resources, said the deal would give it access to two new sectors - construction and property. Timberline has about 20,000 customers.

"We expect to create value through selling Timberline's products to our large and growing US customer base and also through selling additional Sage products and services to Timberline customers," Mr Walker said.

Once the deal has completed, Timberline will become part of Sage's US business - Best Software. Sage has just over 3 million customers worldwide.

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