July 27, 2020 / 6:20 AM / 16 days ago

UPDATE 2-SAP to spin off Qualtrics, partly unwinding $8 billion buy

* Customer sentiment tracker to be floated on U.S. market

* Qualtrics was last big takeover of McDermott era

* SAP to keep controlling stake in "win-win" deal -CEO

* Q2 results and outlook confirmed (Adds shares, analyst on valuation)

By Douglas Busvine

BERLIN, July 27 (Reuters) - Business software group SAP plans to spin off and float Qualtrics, the U.S. specialist in measuring online customer sentiment that it acquired less than two years ago for $8 billion.

The move to list Qualtrics in the United States would partly unwind former CEO Executive Bill McDermott's last big takeover and rebalance SAP back towards its German roots under successor Christian Klein.

McDermott was criticised by investors at the time for overpaying for Qualtrics, which under founder Ryan Smith had been four days away from floating when SAP trumped the valuation it had hoped to achieve on the stock market.

Yet with the market rallying hard since the deal, analysts at Jefferies said Qualtrics could be valued at as much as 14 billion euros ($16 billion) if priced in line with tech growth stocks now trading at 30 times revenue.

Investors reacted by pushing SAP shares 3.9% higher, closing in on record highs, as Klein sought to close a chapter of management turmoil triggered by the Qualtrics deal.

News of the spinoff came before SAP published full second-quarter results on Monday that confirmed the leader in enterprise resource planning software in the second quarter had bounced back from the coronavirus pandemic.

Non-IFRS operating profit rose 7% to 1.96 billion euros at constant currency on a 1% increase in total revenue. SAP restated its 2020 outlook for a rise of between 1% and 6% in operating profit.

STANDING ALONE

Qualtrics, whose Experience Management platform gathers real-time feedback from customers to help analyse how a company's products or services are performing, achieved a 32% increase in revenue in the quarter.

Yet it remains the smallest of SAP's four business segments, reporting a profit of just 7 million euros in the period.

Klein, calling the spinoff a "win-win situation", said it would give Qualtrics the opportunity to achieve its potential with a higher degree of autonomy.

SAP would keep control over and consolidate Qualtrics, which it still sees as a key part of its "Intelligent Enterprise" proposition that spans everything from finance to personnel, logistics and customer relationship management.

Under the proposed initial public offering, Smith would become the largest individual shareholder in Qualtrics. He and his family had previously owned 80% of the business.

SAP Chief Financial Officer Luka Mucic said details of the offering were still to be worked out, but noted it was typical for stock market offerings of tech companies to comprise a stake of 10%-15%.

The goal, he added, would be to capitalise Qualtrics properly while giving SAP more latitude to invest in developing its own business or make smaller "tuck-in" acquisitions.

$1 = 0.8544 euros Reporting by Douglas Busvine; editing by Keith Weir and Jason Neely

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