Adobe Buys Magento for $1.68 Billion

Adobe buys Megento

Adobe Systems Inc. has agreed to buy e-commerce platform Magento for $1.68 billion, in a bid to grab a larger piece of the e-commerce industry from Salesforce.com Inc. and Oracle Corp.

Combined with Adobe Experience Cloud, the Magento Commerce Cloud will bring digital commerce, order management and business intelligence to enable both B2B and B2C shopping experiences across the customer journey, Adobe said Monday in a statement.

Campbell, California-based Magento is the leading platform for open commerce innovation. Every year, Magento handles over $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.

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

Not stopping there, Adobe has also announced an $8 billion share buyback program through 2021. The program is expected to be funded from its future flow of cash from operations and won’t have any material impact on the company’s earnings this year. It is built on the company’s current $2.5 billion repurchase plan scheduled through fiscal year 2019, Adobe said in a statement.

“The Magento acquisition is the latest confirmation of the lines between sales, service, marketing and e-commerce blurring faster than we can recall,” Stifel Nicolaus & Co. analyst Tom Roderick wrote in a Tuesday report.

Adobe said it anticipates the deal closing in the third quarter of its financial year. Magento’s CEO, Mark Lavelle, will join Adobe’s digital experience business, which it’s expected Magento will slip into. The division focuses on marketing analytics and software for managing online advertising.

“We’re excited to join Adobe and believe this will be a great opportunity for our customers, partners and developer community.”

“Adobe and Magento share a vision for the future of digital experiences that brings together Adobe’s strength in content and data with Magento’s open commerce innovation,” Lavelle said in a statement.

Magento rival Shopify fell as much as 5.5 percent in extended trading following the announcement.