The price is a significant premium on the current market value of Business Objects, which recorded a net profit of $75.4m on sales of $1.25bn last year.
The announcement started speculation of a bidding war, and shares in SAP lost over four per cent in early trading.
"The acquisition of Business Objects is in keeping with SAP's stated strategy to double our addressable market by 2010 as announced in 2005," said Henning Kagermann, chief executive of SAP.
The offer has been accepted by the Business Objects board but the floor is still clear for a rival bid. Oracle is already rumoured to be investigating the possibility.
Bernard Liautaud, chairman and founder of Business Objects, said: "The combination of Business Objects and SAP means that we can truly amplify the reach of business intelligence from the C-suite to Main Street."
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