Come True In Oracle Deal

Shares of NetSuite  (N) are rallying after the announcement that the company has agreed to be acquired by Oracle  (ORCL) . This comes after long-standing rumors of a possible tie-up of the two were rekindled in recent weeks, though those rumors were dismissed by many Wall Street analysts.

WHAT HAPPENED: Oracle announced this morning that it has entered into a definitive agreement to acquire NetSuite, “the very first cloud company.” The transaction is valued at $109 per share in cash, or approximately $9.3B. The transaction is expected to close this year.

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RECENT RUMORS DISMISSED: Last week, SunTrust analyst John Rizzuto told investors he did not believe Oracle would buy NetSuite after financial blog Proactive Investors reported on a possible deal, saying he saw the synergies from such acquisition as limited. Further, he questioned the blog’s credibility after it recirculated rumors of a pending deal for the third time in the previous three weeks. Rizzutto also noted that no other major news source had reported on a similar story at the time. The analyst said Oracle would be “ill-advised” to buy NetSuite. Rizzuto was not the only one doubting that an acquisition would take place. On June 13, Ross MacMillan, his peer at RBC Capital, shared a similar opinion, placing a “low to medium” probability on the deal given a mixed strategic rationale and challenges of integration. Nonetheless, MacMillan speculated that if an acquisition took place, the fair value would be $100-$110 per share as suggested by recent comparable transactions. Also on that day, in a separate note to investors, Cowen analyst J. Derrick Wood said he saw little merit to such a buyout argument, citing major product overlap, regulatory and legal risks, and little margin leverage that would be gained by Oracle in acquiring NetSuite.