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Will The Latest Acquisition Drive Oracle Stock Higher? Oracle Corporation (NYSE:ORCL)

  • Oracle completed the acquisition of NetSuite, showing disciplined behavior by insisting on its initial offer.
  • The deal fits well into Oracle's strategy of promoting its cloud products at the expense of on-premise products.
  • The average target price of top analysts is at $44.17, an upside of 10%, which appears reasonable.
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On November 5, Oracle (NYSE:ORCL) confirmed that it has finally completed the acquisition of Netsuite (NYSE:N) for $9.3 billion in cash, or $109 per share that the company had initially offered. In my previous article about Oracle, I had suggested that the acquisition of NetSuite, the cloud business application software company, is a smart move by Oracle. What's more, it is not paying an excessive price for the deal. In fact, Oracle insisted that it will not pay more than what it had first offered despite the resistance from T Rowe Price (NSDQ:TROW) which demanded $133 per share.

T. Rowe had about a 13% stake in NetSuite before the deal, the largest holdings after Oracle's Chairman Larry Ellison who owned about 40% of NetSuite shares. Although Oracle's offer represented a premium of 19% on NetSuite's closing stock price of $91.57 on the day before the bid, T. Rowe was of the opinion that the NetSuite shares were worth more. However, Oracle showed a disciplined behavior insisting on the initial offer, which it considered fair value, and after receiving approval from a majority of the unaffiliated shares of NetSuite (excluding Mr. Ellison's shares), the deal was closed.

As I explained in my previous article, the acquisition fits well into Oracle's strategy of promoting its cloud products at the expense of on-premise products. NetSuite has developed a single system for running a business in the cloud for 18 years, and the deal will give Oracle a better...


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