Software maker Salesforce acquires Demandware in a $2.8 billion cash deal. The acquisition will add an e-commerce platform to its already large box of business productivity tools.

According to a joint statement, Salesforce.com will pay Demandware Inc. stockholders $75 per share, a 56.3 percent premium, to take over the company. Salesforce is so confident in the purchase, which is expected to complete by the end of July, the company took out a $500 million loan to help pay for it.

The cloud-based software created by Demandware is used by numerous companies to build, expand, and manage e-commerce websites.

With functions like payment processing and inventory management, Demandware’s technology will help shore up areas where Salesforce has been weak.

Salesforce isn’t known for bargain hunting

According to the terms of the multi-billion dollar agreement, the cloud-software company is paying roughly 11 times Demandware’s revenue in the past year. In 2012, Salesforce bought social-media marketing company Buddy Media for around 20 times its annual income. Two years later, Salesforce acquired data company RelateIQ in a deal worth $390 million, nearly 80 times its recurring revenue of $5 million.

Industry expert Thomas Roderick with Stifel Nicolaus & Co. believes the reason Salesforce would be willing to pay so much is undoubtedly due to others trying to make their own deal with Demandware.

Roderick named Adobe systems and Oracle as probable competitors.

Demandware shares have plunged more than 21 percent over the past year, but surged 56 percent after the News of the Salesforce deal emerged. During Wednesday’s session, Demandware stock was trading as high as $74.92.

Expensive, but still worth it

Quoting information from research firm Gartner, Salesforce expects spending on digital commerce platforms will rise to around $8.5 billion, or 14 percent, by 2020. With customers that include Lands’ End, Adidas, and L’Oreal, Demandware sales have grown more than 30 percent for the last 10 quarters, while revenue is expected to continue to grow by an average 27 percent in each of the next four years.

Through the Demandware acquisition, Salesforce predicts the company’s 2017 revenue to increase between $100 million and $120 million. The company expects total revenue for fiscal 2017 to be just over $8 billion.

Salesforce Chief Operating Officer Keith Block said the acquisition will allow the company to easily integrate Demandware’s platform. Salesforce plans to create a brand new division named Commerce Cloud specifically to sell storefront e-commerce software.

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