Oracle to buy NetSuite in $9.3bn deal

Oracle CEO Larry Ellison proves he means business in cloud with yet another acquisition

Oracle has agreed a $9.3bn deal to acquire cloud rival NetSuite in a proposed deal that is expected to close in 2016 - provided there are no anti-trust or other investigations first.

Oracle CEO Mark Hurd claimed in a statement that NetSuite's cloud applications, which tend to be targeted towards small and mid-sized businesses, will continue and co-exist alongside Oracle's own cloud applications. "We intend to invest heavily in both products - engineering and distribution," said Hurd.

NetSuite CEO Zach Nelson, who has been at the helm of the company since 2002, said that NetSuite would benefit from Oracle's size and "global scale". As a result, NetSuite would be able to "accelerate the availability" of its cloud services to more industries and more countries.

Evan Goldberg, who founded the company in 1998 and remains its chairman and chief technology officer, added: "NetSuite has been working for 18 years to develop a single system for running a business in the cloud... This combination is a winner for NetSuite's customers, employees and partners."

The evaluation and negotiation of the transaction was led by a special committee of Oracle's board of directors consisting solely of independent directors, claimed Oracle, and this committee unanimously approved the transaction.

Founded in 1998 as NetLedger, NetSuite was one of the first cloud services companies - back when they were labelled ‘application service providers' or ASPs.

Goldberg's original vision was web-hosted accounting software, but the suite of offerings has grown to include HR, orders and inventory, shipping and billing, e-commerce, retail, content management and customer relationship management software. NetSuite claims more than 30,000 customers, most of whom are SMEs.

The company was initially backed with around $125m in funding from Ellison via his Tako Ventures investment business, alongside StarVest Partners, venerable HR software company ADP and UBS PaineWebber.

While it floated on the New York Stock Exchange in 2007 and achieved revenues of $741m in 2015, it posted a net loss of $124.7m.

This morning, before the deal was announced, the company was valued at $7.37bn on NYSE. However, Ellison and family already own just over 45 per cent of the company and completing the acquisition should therefore be a formality. With such a large stake in the company, it is unlikely that any rival suitor will emerge in an attempt to outbid Oracle.