Oracle to Buy NetSuite for $9.3 Billion--3rd Update
July 28 2016 - 12:27PM
Dow Jones News
By Jay Greene
Oracle Corp. agreed to buy NetSuite Inc. for $9.3 billion,
bolstering the software maker's cloud-computing offerings as it
races to catch up to rivals.
Oracle said is paying $109 in cash, a 19% premium to NetSuite's
closing price Wednesday of $91.57. The deal is expected to close in
2016, subject to regulatory and shareholder approval.
The deal, among the largest in Oracle's history, reunites
Chairman Larry Ellison with Zach Nelson, NetSuite's chief
executive, who ran Oracle's marketing operations in the 1990s. Mr.
Ellison is NetSuite's largest investor; entities owned by Mr.
Ellison and his family held nearly 40% of NetSuite's shares,
according to NetSuite's annual proxy statement filed in April. Much
of his net worth is also tied up in Oracle, which he co-founded in
1977.
Mr. Ellison's position on both sides of a deal between two
publicly traded companies raises questions about potential
conflicts of interest. While Oracle declined to address the matter,
it said in its press release the deal will only close if a majority
of NetSuite shares not owned by Mr. Ellison and his family approve
the deal. It also said a committee of Oracle's independent
directors evaluated and negotiated the deal.
The Ellison family's stake in NetSuite means chances for a rival
bidder to emerge are "slim to none," said Stifel Nicolaus Co.
analyst Brad Reback. Given the multiple Oracle offered -- about
nine times the next 12 months' projected revenue -- shareholders
may be hard-pressed to demand a better deal, he said.
The acquisition had been rumored for weeks, pushing NetSuite's
shares up from $72.19 just a month ago. The deal represents a
premium, though it is still below NetSuite's closing price of
$115.57 in February 2014.
In morning trading, NetSuite rose 18% to $108.17, while Oracle
shares was up less than a percent to $41.04.
Both companies provide business applications called
enterprise-resource planning software. NetSuite, though, is among
the leaders in providing those offerings to customers via
subscription-based, on-demand computing.
Oracle said it plans to invest heavily in both products, and
that the deal would immediately add to its earnings, on an adjusted
basis. In a statement provided to The Wall Street Journal, Chief
Executive Mark Hurd said Oracle would "accelerate the pace of
innovation" and "expand the global reach" of NetSuite.
Oracle declined to say whether the deal would lead to any
executive changes or layoffs. NetSuite didn't immediately respond
to a request for comment.
While the companies offer some overlapping products, NetSuite
has made inroads with smaller corporate customers, where Oracle
hasn't been as strong, Mr. Reback said. NetSuite, whose
international sales are modest, will benefit from Oracle's global
sales operation, he said.
While Oracle has improved its homegrown cloud products, it is
battling companies such as Salesforce.com Inc. and Workday Inc.,
which deliver software and storage solely on the web. Oracle also
is fighting to keep pace with giants including Microsoft Corp. and
Amazon.com Inc., which have built large businesses running
customers' computing operations in the cloud.
Separately, NetSuite also reported its quarterly results.
Revenue in the second quarter rose 30% to $230.8 million, but its
loss widened to $37.7 million from $32.3 million in the year-ago
period. Excluding certain costs, such as expenses related to
stock-based compensation, NetSuite's earnings rose to $6.6 million,
or 8 cents a share, from $1.7 million, or 2 cents a share.
Analysts surveyed by Thomson Reuters were expecting earnings of
3 cents a share on revenue of $231 million.
Oracle is an aggressive acquirer. spending more than $1 billion
in recent months to buy Opower Inc., which makes cloud software for
the utility industry, and Textura Corp., which provides similar
services for construction businesses.
The largest recent multibillion deal was Oracle's $5.3 billion
purchase in 2014 of Micros Systems Inc., which sells
internet-connected cash registers.
Oracle's other big acquisitions include its acrimonious hostile
takeover of PeopleSoft Inc. for $10.3 billion in 2004, another
hostile purchase of BEA Systems Inc. for $8.5 billion in 2008, and
its 2009 deal to buy Sun Microsystems Inc. for $7.4 billion.
Write to Jay Greene at Jay.Greene@wsj.com
(END) Dow Jones Newswires
July 28, 2016 12:12 ET (16:12 GMT)
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