Oracle announced on Thursday July 28th its intention to purchase NetSuite. The software giant will pay $9.3 billion in cash to acquire NetSuite, a cloud computing company co-founded by Oracle executive chairman Larry Ellison, its largest shareholder.
Oracle will pay $109 in cash per NetSuite share in the transaction, expected to close this year, a 19% premium to NetSuite's closing share price of $91.57 Wednesday. NetSuite's board has unanimously approved the deal, the company said.
Shares of NetSuite rallied 18.4% Thursday to $108.41 after rising 9% Wednesday on speculation of a deal. Oracle shares rose 0.6% to $41.19.
Redwood Shores, Calif.-based Oracle has been attempting to make a rapid, costly pivot to cloud services as large rivals including Microsoft and Amazon — along with cloud-first companies such as Salesforce.com — make aggressive plays for corporate clients with cloud-based business offerings.
While cloud services revenue has been rising rapidly at Oracle, it hasn't been able to offset the decline in software license revenue, its biggest business, as companies shift more of their activities to Internet- or cloud-based applications.
In NetSuite, Oracle gets the company that became the first to offer a full suite of enterprise resource planning applications, said Ray Wang, principal analyst and founder at Constellation Research.
It's also buying a business with close ties to Oracle. Located in San Mateo, Calif., NetSuite was co-founded in 1998 by current NetSuite Chairman and Chief Technology Officer Evan Goldberg and Ellison as NetLedger, a cloud accounting company.
Ellison, who stepped down as Oracle CEO two years ago, is now Oracle's executive chairman. He and his family remain the largest shareholders of NetSuite, owning more than 45% of outstanding shares as of March 31, 2016, according to filings with the Securities and Exchange Commission.
With NetSuite's IPO in 2007, the company was valued at $2.1 billion. Though it's not profitable, its market cap had increased to $7.4 billion this year.
Roger Leyden, Director of Global Business Development at B2BGateway states, "Oracle's offer to purchase NetSuite for $9.3 billion shows further commitment by Oracle to all thing's cloud. As everyone knows, NetSuite is the world's leading cloud based ERP solution on the marketplace today. With over 16 years' experience in financial cloud technology, NetSuite have left all competitors in their wake and the investment from Oracle can only but cement NetSuite's position as the number 1 cloud based ERP solution. B2BGateway has been a NetSuite EDI partner since 2001 and we look forward to building a strong relationship with Oracle and NetSuite in the years to come."
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