On November 4, Oracle’s high-stakes offer to buy NetSuite for $9.3 billion will expire. The shareholders holding out for more aren’t just bluffing, and they’re holding the cards. For Oracle, the pot’s too rich. They’ll fold and walk away from the table.
It will be a mutual agreement to disagree, where neither party wins.
Owning NetSuite would give Oracle a huge spike in cloud revenue. At $2.9 billion, their 2016 cloud revenues are decent. They’re expecting serious growth in 2017 but with not quite the same authority as their rival Salesforce, who is seriously kicking it. Oracle’s cloud growth strategy included the NetSuite buy.
It would also give the database giant access to the uncontested small and medium-sized business market. NetSuite’s software is made for the cloud imperative of today’s companies. Their cloud financials, ERP and Omni-channel commerce suites are used by 30,000 organizations worldwide. The SMB market is untapped, and Oracle sees the potential.
Huge potential, that’s the problem.
Activist shareholder group T. Row Price Group, who holds about 18% of NetSuite shares, is the company’s largest shareholder. (After Larry Ellison, of course, who owns nearly 40% of NetSuite, the company he co-founded after co-founding Oracle.) Price believes they deserve better than $109 per share, because the offer is based on the company’s market value, and not the company’s value to Oracle. Or in their words, the “synergies that will accrue to the buyer.”
They also believe Ellison’s “unique relationship” with NetSuite scared off potential suitors from outbidding Oracle. No doubt Ellison, and everyone else, thought it was a done deal.
At last count, Oracle has secured only 4.6 million of the 20.4 million shares they need for the acquisition to go forward. The deal comes off the table November 4.
The deal will fall through, and the two will go back to being competitors, NetSuite gaining ground with SMBs and Oracle doing just fine with its big-time, big shot brand, products, and Salesforce. And deep pockets to find another wild card to play.
Do you see a clear winner in the failed deal? Or does everyone lose?