Cloud giant Salesforce.com Inc (NYSE: CRM) has announced that it will acquire Slack Technologies Inc (NYSE: WORK) in a $27.7 billion cash deal
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Salesforce.com Inc (NYSE: CRM) is one of the largest and oldest ‘cloud’ companies in the world. And it looks set to become even larger. Salesforce announced this morning (AEDT time) that it will acquire the workplace communications company Slack Technologies Inc (NYSE: WORK).
About the companies
Salesforce was founded back in 1999, and today provides customer relationship management services as well as marketing automation, analytics, and application development services. This company has been on a tear in 2020 (and before that). Salesforce shares have climbed 44.53% in 2020 so far. It gets better. The company has climbed 193% over the past 5 years, and 576% over the past decade. On the current share price of US$241.35 a share, Salesforce has a gigantic market capitalisation of US$219.6 billion.
Slack is a US$25 billion company which specialises in intra-workplace communication via its eponymous flagship app. Billed as an ’email killer’, Slack allows colleagues to communicate and share data, documents and other items with each other. It has been growing handsomely in recent years, including posting an annual revenue growth number of 49% in a recent quarterly update.
Salesforce announced it would be acquiring Slack in a stock/cash arrangement. Each shareholder of Slack will receive US$26.79 in cash per share under the deal, as well as 0.076 shares of Salesforce for every share of Slack owned. That offer values Slack at a market cap of roughly US$27.7 billion
Slack shares had been trading between US$25-$29 for most of November. However, the stock jumped almost 40% last week to roughly US$40 a share when rumours of this deal began circulating. Last night (our time), Slack shares closed at US$43.84, representing a market cap of US$25.01 billion.
Salesforce + Slack: A blessed union
Salesforce had this to say on the merger:
[The] combination of [the] #1 CRM platform with the most innovative enterprise communications platform will create the operating system for the new way to work, enabling companies to grow and succeed in the all-digital world… This is a match made in heaven. Together, Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world. I’m thrilled to welcome Slack to the Salesforce Ohana once the transaction closes.
Slack’s management was equally exuberant, with CEO Stewart Butterfield stating the following:
Salesforce started the cloud revolution, and two decades later, we are still tapping into all the possibilities it offers to transform the way we work. The opportunity we see together is massive… Personally, I believe this is the most strategic combination in the history of software, and I can’t wait to get going.
It seems this announcement is a done deal. However, it’s worth noting that, although the boards of directors of both companies have approved the deal, Slack shareholders have yet to sign off on it. Although, Slack’s management has recommended they do so. If they indeed give the green light, the merger is only expected to be completed “in the second quarter of Salesforce’s fiscal year 2022″.
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Sebastian Bowen owns shares of Slack Technologies. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Salesforce.com and Slack Technologies. The Motley Fool Australia has recommended Slack Technologies. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.