Oracle Corporation (NASDAQ: ORCL), the second-largest software maker by revenue after Microsoft, agreed to acquire NetSuite Inc. (NASDAQ: N) for $9.3 billion to gain enormous market share in cloud computing business.
Many of the products and services arrived Oracle’s portfolio through acquisitions. Oracle currently designs, manufactures, and sells software and hardware products, as well as offering complementary services like financing, training, consulting, and hosting services.
The deal means Oracle will now have the largest installed base of cloud customers, topping that of leading competitors Microsoft and IBM, and a $800 million extra income in revenue from NetSuite that will certainly increase their product offerings.
— Evan Kirstel (@evankirstel) July 28, 2016
Oracle’s biggest deal since 2005
The transaction is expected to conclude by the end of this year. NetSuite investors will receive $109 per share, a 62% premium to the company’s closing price of $67.42 on Wednesday, after an 18% increase to $107.98 today. Meanwhile, Oracle shares slipped 19 cents to $40.74.
It was Oracle’s biggest splash since buying PeopleSoft in 2005 for $11.1 billion. In 2010, the California-based company purchased Sun Microsystems in a deal valued in $7 billion, which transformed Oracle from a software company to a manufacturer of both software and hardware.
Oracle and NetSuite go way back
Rumors that Oracle would buy NetSuite have been circulating since 1998. NetSuite was founded that year by Evan Goldberg, a former Oracle executive, as NetLedger. Goldberg received approximately $125 million in initial financial backing from Larry Ellison, founder and then CEO of software giant Oracle, and NetLedger became Oracle Small Business Suite. The software company from San Mateo, California, finally settled for current name NetSuite.
Current NetSuite CEO Zach Nelson also worked in Oracle, while the NetSuite software relied on database licensed by Oracle.
“Mr. Ellison is able to exercise control over approval of significant corporate transactions, including a change of control or liquidation,” was stated in one of the company’s quarterly reports filed with the US Securities and Exchange Commission in 2015.
Larry Ellison owned more than 40% of NetSuite, while Goldberg only had a 3% stake. Following NetSuite’s acquisition by Oracle, it was reported that Ellison would get about $3.5 billion, and Goldberg about $231 million.
NetSuite had become a lead competitor in the same market as Oracle, so the sale was only logical with Ellison’s giant stake in both companies. Plus, Ellison is already experienced in buying companies partially owned by him. In 2011, Oracle acquired storage company Pillar Data Systems, in which Ellison had a majority stake. But that sale was a rocky affair, with lawsuits from Pillar investors resulting in Ellison agreeing to give up his $575 million shares of the deal to them.
Source: Business Insider