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29 Jul 2016

Oracle acquires cloud software provider NetSuite for $3.5 billion

NetSuite, Oracle and Larry Ellison

Business software maker Oracle Corp. has agreed to pay $9.3 billion in cash for NetSuite Inc on Thursday.

Oracle chaiman Larry Ellison stands to make a personal profit of $3.5 billion from his company's takeover of cloud-company NetSuite.

Ellison owns 27% of Oracle's common shares, a stake worth $47.6 billion and nearly 40% of NetSuite's common shares, a stake worth $3.5 billion.

In context

NetSuite, Oracle and Larry Ellison

What is cloud computing?

Cloud computing, referred to as simply "the cloud," is the delivery of on-demand computing resources, from applications to data centers, over the internet on a pay-for-use basis. Cloud computing services can be private, public or hybrid.

Acquiring Company Information

Oracle- Integrated Cloud Applications and Platform Services

Oracle was the first company to commercialize relational databases 30 years ago. It was founded by Larry Ellison, Bob Miner and Ed Oates.

Today Oracle provides Integrated Cloud Application services to various industries; although Larry Ellison had reservations with the term 'cloud' being used in this context.

Oracle and Salesforce are competing to be the first cloud application service to have $10 billion revenue.

NetSuite Inc.

Acquired Company information

NetSuite Inc.

NetSuite, founded in 1998, pioneered cloud computing by creating the first company dedicated to providing business applications over the internet.

It sells software services used to manage a business' operations and customer relations, and mainly caters medium to enterprise-sized businesses.

It was founded six months before Marc Benioff, a former Oracle salesman, established Salesforce.com, which is credited with pioneering the idea for cloud-based software.

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29 Jul 2016

Oracle acquires cloud software provider NetSuite for $3.5 billion

Business software maker Oracle Corp. has agreed to pay $9.3 billion in cash for NetSuite Inc on Thursday.

Oracle chaiman Larry Ellison stands to make a personal profit of $3.5 billion from his company's takeover of cloud-company NetSuite.

Ellison owns 27% of Oracle's common shares, a stake worth $47.6 billion and nearly 40% of NetSuite's common shares, a stake worth $3.5 billion.

Deal specifics

Details

Deal specifics

Oracle would be paying $109 a share in cash for NetSuite, i.e. a 19% premium to the company's closing price on Wednesday of $91.57.

According to Dealogic, it is lower than the average 26% premium for all technology mergers and acquisitions valued above $1 billion.

However, there is a conflict of interest owing to Ellison's role as the biggest shareholder in both the companies.

Similar conflicts of interest in the past

In 2011, Oracle settled a shareholder suit related to its acquisition of Pillar Data Systems, a company that was largely owned by Ellison. He later agreed to forgo the $575 million he would have received, if Pillar met subsequent earning targets as part of Oracle.

Oracle's earlier acquisitions

The largest deal was Oracle's $5.3 billion purchase of Micros Systems Inc.(2014), which sells internet-connected cash registers. Other acquisitions include its hostile takeover of PeopleSoft Inc. for $10.3 billion (2004), BEA Systems Inc. for $8.5 billion(2008), and in 2009, Sun Microsystems Inc. for $7.4 billion.

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