Salesforce.com (CRM) announced a deal to acquire Slack Technologies (WORK) for $27.7 billion late Tuesday, with a larger-than-expected cash component to the purchase. Salesforce stock stumbled on the news as Slack became the company’s largest acquisition to date.
Slack shareholders will receive $26.79 in cash and 0.0776 shares of Salesforce common stock under the deal. Salesforce agreed to pay a 55% premium to Slack stock’s closing price on Nov. 24.
Salesforce stock fell 3.6% to near 233 in extended trading on the stock market today. Slack stock edged up a fraction to 44.15.
Analysts had speculated that a Slack acquisition could dilute existing shareholders as much as 8% to 10%. The enterprise software maker didn’t say in its release how it would finance the deal.
Salesforce reported October quarter earnings and revenue that topped analyst estimates as the software maker recorded a big investment gain on Snowflake (SNOW) stock.
Salesforce earnings boomed to $1.74 a share, including an 86-cent gain from investments, the company said. Revenue rose 20% to $5.42 billion.
A year earlier, Salesforce earnings were 75 cents a share on sales of $4.51 billion. Analysts expected Salesforce to report flat earnings of 75 cents a share on sales of $5.25 billion.
Salesforce Stock: Slack Deal Targets Microsoft
Slack is set to report third-quarter earnings on Dec. 9. Reports of Salesforce’s interest in Slack surfaced last week.
Salesforce software helps businesses organize and handle sales operations and customer relationships. Slack sells workplace collaboration software.
A growing appetite for acquisitions has been a drag on Salesforce stock.
Salesforce bought Tableau Software last year for $15.7 billion in an all-stock deal. In 2018, Salesforce bought MuleSoft for $6.5 billion in cash and stock.
Growing competition with Microsoft (MSFT) has been an overhang on Slack earnings since its direct listing in June 2019. Microsoft Teams tools and Slack’s chat software aim to replace email.
Salesforce, meanwhile, also faces more competition from Microsoft’s Dynamics unit in the customer relationship management software market, analysts say.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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