Oracle Corporation (ORCL) to Acquire NetSuite (N) for $9.3 Billion

Oracle Cloud Platform
Source: Oracle

Oracle Corporation (NYSE:ORCL) signed an agreement to acquire NetSuite for (NYSE:N) for $109 per share or around $9.3 billion in cash to help strengthen its market share in the cloud computing industry.

The stock price of NetSuite surged more than 18% to $108.20 per share around 1:40 in the afternoon in New York.  Oracle shares were trading at $41.00 each, up by 0.13%.

NetSuite pioneered the cloud computing revolution in 1998. It is the first cloud computing company dedicated in delivering business applications over the internet.

NetSuite is currently offering a suite of cloud-based financials/ Enterprise Resource Planning (ERP) and omnichannel software to more than 30,000 companies, organizations, and subsidiaries around the world.

A Special Committee composed of independent directors of Oracle’s Board led the evaluation and negotiation of the transaction with NetSuite. The Special Committee unanimously approved the deal on behalf of Oracle and its Board.

Morningstar Analysts Rodney Nelson told Reuters that the deal was “pricey from Oracle’s perspective, but it’s understandable and justifiable” under the current environment where software-as-a-service companies go as high as 10, 11, 12 times sales.”

Oracle plans to invest heavily in engineering and distribution

In a statement, Oracle CEO Mark Hurd said, “Oracle and NetSuite cloud applications are complementary, and will coexist in the marketplace forever. We intend to invest heavily in both products—engineering and distribution.”

“We expect this acquisition to be immediately accretive to Oracle’s earnings on a non-GAAP basis in the first full fiscal year after closing,” said Safra Catz, CEO Oracle.

On the other hand, NetSuite Founder, Chairman and CTO Evan Goldberg said his company has been working to develop a single system for running a business in the cloud for 18 years. He believes that the merger is beneficial for the company’s customers, employees, and partner.

“NetSuite will benefit from Oracle’s global scale and reach to accelerate the availability of our cloud solutions in more industries and more countries. We are excited to join Oracle and accelerate our pace of innovation,” said NetSuite CEO Zach Nelson.

The transaction is subject to regulatory approvals and other customary closing conditions including NetSuite stockholders’ offering a majority of shares in the tender offer.  It is also subject to a condition that a majority of NetSuite’s outstanding shares not owned by its executive officers or persons affiliated with Larry Ellison, his family members and any affiliated entities will be tendered in the tender offer.

NetSuite and Oracle expected to close the deal this year.