Oracle trumps IBM, acquires Sun Microsystems for $7.4 billion

20 April 2009

Weeks after a reported agreement by IBM to buy Sun Microsystems fell apart, a new suitor in the form of Oracle Corporation has stepped in to seal the deal for $7.4 billion, a $400 million premium over the price offered by IBM. (See: IBM set to acquire Sun Micro for about $7 billion: report)

Oracle will buy Sun shares for $9.50 each in cash. The price represents a 42 per cent premium to Sun's Friday closing stock price of $6.69. Oracle said the deal is valued at $5.6 billion net of Sun's cash and debt.

IBM had offered to buy Sun for $9.40 per share, but acquisition talks fell apart earlier this month. Sun balked at the price and cancelled IBM's exclusive negotiating rights, leading IBM to withdraw its offer.

''We expect this acquisition to be accretive to Oracle's earnings by at least 15 cents on a non-GAAP basis in the first full year after closing,'' said Oracle president Safra Catz. ''We estimate that the acquired business will contribute over $1.5 billion to Oracle's non-GAAP operating profit in the first year, increasing to over $2 billion in the second year.''

''This would make the Sun acquisition more profitable in per share contribution in the first year than we had planned for the acquisitions of BEA, PeopleSoft and Siebel combined,'' Catz added.

Oracle said the boards of both companies unanimously approved the transaction, which is anticipated to close this summer, subject to Sun stockholder approval, certain regulatory approvals and customary closing conditions.

"The acquisition of Sun transforms the IT industry," said Oracle chief executive Larry Ellison, in a statement. "Our customers benefit as their systems integration costs go down while system performance, reliability and security go up."