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Adobe buys e-commerce firm Magento for $1.7 billion and announces stock buybacks

2018 NAB Show in Las Vegas, USA - 10 Apr 2018
Adobe has sought to diversify from the digital media products that made it one of the world’s largest software companies.
(Andrew Gombert / EPA-EFE/REX/Shutterstock)
Bloomberg

Adobe Systems Inc. agreed to buy e-commerce company Magento for $1.68 billion, in a bid to capture a bigger slice of the digital-commerce industry from Salesforce.com Inc. and Oracle Corp.

The Photoshop software provider said Monday that it is making its third-biggest acquisition to create an end-to-end system for designing digital ads, building e-commerce websites and other online customer experiences and completing transactions.

Campbell, Calif.-based Magento offers software to build and run web stores and handle online purchases, shipping and returns. It also helps merchants sell products through social media ads and competes with Shopify Inc.

Magento technology supports more than $155 billion in gross merchandise volume, and customers include Canon Inc. and Rosetta Stone Inc. EBay Inc. sold Magento in 2015, and it has been backed by private equity firm Permira Holdings LLP since then.

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Adobe has sought to diversify from the digital media products that made it one of the world’s largest software companies. The deal is slightly smaller than Adobe’s 2009 purchase of Omniture, which made the company a player in digital advertising. The Magento purchase would see Adobe battle cloud-based commerce services Salesforce, Oracle and SAP SE. This part of Adobe’s business, known as its Experience Cloud, generates less revenue and grows more slowly than its creative software offerings such as Photoshop.

Adobe also announced an $8-billion share buyback program through fiscal year 2021. The program is expected to be funded from its future cash flow from operations and won’t have a material impact on the company’s earnings this fiscal year. It expands on the company’s current $2.5-billion repurchase plan scheduled through fiscal year 2019, Adobe said in a statement. The company’s shares rose about 1% in extended trading after closing Monday at $238.10.

The deal for Magento is expected to close in the third quarter of Adobe’s fiscal year, pending regulatory approval. Adobe would gain access to Magento’s mid-market and large corporate customers, and gain a foothold in physical store and online transactions.

Magento Chief Executive Mark Lavelle said the sale would accelerate his company’s commerce progress and reflected a shared vision between the two firms, which were partners before the transaction.

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Grant writes for Bloomberg.


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