Oracle to Buy NetSuite for $9.3 billion--2nd Update

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 is paying $109 in cash for NetSuite, a 19% premium to the company'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.

Both companies provide applications for running a business 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.

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.

In morning trading in New York, shares of NetSuite rose 18% to $108.01, while Oracle shares slid 3 cents to $40.90.

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 [e-mail]

(END) Dow Jones Newswires

July 28, 2016 09:59 ET (13:59 GMT)

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