Google acquires API platform provider Apigee for $625M

Google paid $17.40 a share for the publically traded company

Application programming interfaces (APIs), which allow apps to share data and information with each other, are becoming big business. According to Forrester, companies in the U.S. alone will spend nearly $3 billion on API management by 2020. 

Google, which has its own set of APIs that it offers, is looking to to bulk them up, so it has entered into a definitive agreement to acquire API platform provider Apigee, it was announced on Thursday.

The company is paying $17.40 per share in cash, for a total value of approximately $625 million. The transaction is expected to close by the end of this year. 

Founded in 2005, Apigee provides an API platform that can be used by companies to make their services available on multiple mobile devices and channels. On top of the platform, Apigee also provides its customers analytics to measure the activity coming from those apps.

To make it clear what Apigee actually does, let's take the example of what it did for one of its biggest customers: Walgreens.

Walgreens offers a photo-printing service that it wanted to add to make accessible through a mobile device. So, the company used Apigee to build an app that runs on the iPhone that allows consumers to upload their photo directly to Walgreens from their phones without having to go onto the Walgreens website first.

Apigee did not build the app but it did provide a layer on top of the Walgreen's infrastructure that enabled Walgreen's engineers to make the website photo-sharing available on mobile devices.

The company offers Apigee Edge, its API-management solution, as well as Apigee Insights, a big data analytics platform that helps organizations gain new business insights in the app economy; Apigee Link, which turns devices business into digital IoT platforms; and Apigee Sense, its security service.

Apigee customers include 30 percent of the Fortune 100, four of the top five Global 2000 retail companies, and five of the top 10 global telecommunications companies. It is used by Burberry, Morningstar, First Data, AT&T, Bechtel, and Live Nation.

"APIs — the mechanism developers use to interface and integrate with outside apps and services — are vital for how business gets done today in the fast-growing digital and mobile marketplace. They're the hubs through which companies, partners and customers interact, whether it's a small business applying online for a loan or a point of sale system sending your warranty information to the manufacturer," Diane Greene, senior vice president of Google’s cloud business, wrote in a blog post.

“The addition of Apigee’s API solutions to Google cloud will accelerate our customers’ move to supporting their businesses with high quality digital interactions."

While Apigee provides Google with a set of API tools to offer its own customers, Google gives Apigee access to more 

"Many companies understand the importance of using digital technologies to transform business models and processes, but often they pursue digital and cloud independently. Not only are they trying to deliver digital experiences that are fast and convenient for their customers and partners, but their IT organizations are also shifting infrastructure to the cloud to increase agility and lower costs. Smart companies realize that these are two sides of the same coin; that digital strategy must converge with cloud strategy," Apigee CEO Chet Kapoor wrote in his own blog post. 

"Apigee is proud to be a leader in APIs. We have a solid track record of working hand in hand with some of the largest and most demanding brands in the world to solve new problems and create new products. We can't wait to see how much better and faster we can be with Google."

In an FAQ, Apigee says that nothing will change, at least not right now. It will "continue to operate indendently," until the transaction closes. There's no indication of what will happen to Apigee after that, though. 

The Palo Alto, California-based Apigee had raised $171 million from investors that included Pine River Capital Management, Wellington Management Company, Norwest Venture Partners, Bay Partners, Third Point LLC, SAP Ventures, funds managed by BlackRock, Focus Ventures, and Accenture.

Apigee was valued at $671 million when it raised $60 million in April of 2014, but it went public at a valuation of $494 million, a decrease of 26 percent. 

It's stock is currently up 6.49 percent, to $17.40 a share, just above its $17 IPO price.

VatorNews reached out to Apigee for more information on the future of the two companies. We will update this story if we learn more.