SAP to make Qualtrics public but keep majority ownership

SAP has announced its intentions to spin out Qualtrics, making it public through an initial public offering (IPO).

“SAP’s primary objective for the IPO is to fortify Qualtrics’ ability to capture its full market potential within Experience Management,” SAP wrote. “This will help to increase Qualtrics’ autonomy and enable it to expand its footprint both within SAP’s customer base and beyond.”

SAP only scooped up Qualtrics in late 2018, paying $8 billion to add the company to its cloud portfolio.

Qualtrics had originally planned to go public, issuing a prospectus in November detailing its plan to list on the Nasdaq, offering between $18 and $21 per share for its IPO. SAP swooped in just four days before Qualtrics was to go public, however.

Justifying its plan to spin out Qualtrics, SAP said the company has operated with “greater autonomy” than other companies SAP had previously acquired.

Qualtrics revenue for its latest reported quarter was €161 million, an increase of 82%.

The company said it would retain majority ownership of Qualtrics and has “no intention of spinning off or otherwise divesting its majority ownership interest”. Qualtrics founder Ryan Smith intends to be Qualtrics’ largest individual shareholder.  

“SAP’s acquisition of Qualtrics has been a great success and has outperformed our expectations with 2019 cloud growth in excess of 40%, demonstrating very strong performance in the current setup,” SAP CEO Christian Klein said. 

“As Ryan Smith, Zig Serafin, and I worked together, we decided that an IPO would provide the greatest opportunity for Qualtrics to grow the experience management category, serve its customers, explore its own acquisition strategy, and continue building the best talent.”

Klein said SAP would remain as Qualtrics’ “largest and most important” go-to-market and research and development partner while giving Qualtrics “greater independence to broaden its base by partnering and building out the entire experience management ecosystem”. 

It’s a similar scenario to the Dell Technologies-VMware model. However, the PC giant reportedly could let go of VMware altogether.

Dell gained its stake in VMware in its 2016 merger with EMC, with the transaction costing around $67 billion.

According to The Wall Street Journal, the primary option being considered is to spin out VMware to shareholders in Dell. However, with all options seemingly on the table, the Journal further stated that Dell could look to increase its stake in the virtualisation giant, or do absolutely nothing at all.

A spin-off of VMware would enable Dell Technologies to monetise its 81% stake in the virtualisation giant. VMware has been a tracking stock of EMC and Dell, and should a spin-off happen, Dell said it would plan to maintain “the mutually beneficial strategic relationship currently in place”.

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