Adobe Systems Inc., ADBE 0.00% the elder software-business statesman behind photo-editing software Photoshop and PDF reader, is buying e-commerce firm Magento Commerce for $1.68 billion, adding a key piece to its platform.
The acquisition—which would put Adobe head-to-head with the likes of Salesforce.com —presents a revenue opportunity of some $13 billion, Brad Rencher, Adobe’s executive vice president of digital experience, said in a conference call Monday, citing market-research firm estimates.
Magento, already an Adobe partner, was bought in 2015 from eBay Inc. EBAY -0.08% as part of a $925 million deal by a group of investors that included Permira, Sterling Partners, Longview Asset Management and Innotrac Corp. Permira carved out Magento in November of that year.
In 2017, Chinese investment firm Hillhouse Capital invested $250 million in Magento. That investment valued the company at some $700 million at the time, according to a previous Dow Jones report. Hillhouse Capital is selling its stake as part of the deal with Adobe, Permira said.
Permira stands to return more than five times its initial investment in Magento of around $200 million, according to a person familiar with the deal.
Magento, whose clients include Canon and Rosetta Stone along with overlapping Adobe customers Coca-Cola Co. and Nestlé SA, handles more than $150 billion in gross merchandise volume, according to Permira. That compares with eBay’s $88.4 billion in 2017 and Amazon.com Inc.’s $313.4 billion, according to FactSet data.
Under the terms of the deal, which is expected to close in the third quarter, Magento Chief Executive Mark Lavelle would continue to lead Magento’s roughly 700 workers as part of Adobe’s digital experience business, Adobe said. He would report to Mr. Rencher.
The acquisition, subject to regulatory approval, is expected to lower slightly earnings for the year, but it isn’t expected to significantly affect earnings targets, Chief Financial Officer John Murphy said in the call with analysts.
Separately, Adobe said its board had approved spending up to $8 billion to buy back stock through its fiscal year 2021. The company said it would rely on cash flow from operations to buy back stock.
Adobe’s shares, which outperform the market with a 36% gain this year, rose 0.8% to $240 in after-hours trading.
—Laura Cooper contributed to this article.
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