Oracle to buy Micros

June 23, 2014 05:22 AM

Oracle Corp. agreed to buy Micros Systems Inc. for $5.3 billion as Chief Executive Officer Larry Ellison seeks to reignite slowing growth by adding software for hotels and restaurants.

Micros stockholders will get $68 a share in cash, 18% more than the closing price on June 16, a day before Bloomberg reported the companies were near a deal. Net of Micros’s cash, the value is $4.6 billion, Oracle said in a statement today. The Redwood City, California-based software maker came close to acquiring Micros six years ago only for the deal to fall through at the last minute.

Oracle, which has acquired about 100 companies in the last decade, has seen the incremental revenue gains accrued through those deals dry up. After a late entry to the cloud-computing market, sales have declined or gained less than 5% in each of the past 11 quarters as customers gravitate to rivals selling Internet-based software. Last week, Oracle posted profit and sales that missed analysts’ estimates.

“Micros gives them a strong foothold in the hotel and hospitality industry,” said Richard Williams, an analyst at Summit Research Partners LLC in Summit, New Jersey, who recommends holding Oracle’s stock. “That will be an important asset for them and will tie well into their other systems such as their engineer systems and cloud-related offerings.”

Oracle’s shares we little changed at $40.80 as of 9:33 a.m. in New York, after slumping 4% on June 20 following the disappointing fiscal fourth-quarter earnings report. Micros, which closed at $65.77 on June 20, jumped to $67.85.

Largest Since 2010

The deal, expected to close in the second half, will add to Oracle’s earnings immediately, excluding some items, Chief Financial Officer Safra Catz said in the statement. The acquisition would be Oracle’s largest since the $5.7 billion takeover of Sun Microsystems Inc. in 2010, data compiled by Bloomberg show.

Daniel Ives, an analyst at FBR Capital Markets, expects more acquisitions after the Micros purchase.

“It’s clear they need to do deals on the horizon in order to accelerate growth,” said Ives, who rates Oracle’s shares outperform. “They were late to the cloud.”

Systems for Hotels

Based in Columbia, Maryland, Micros sells point-of-sale systems for hotels, restaurants, and retailers.

Six years ago, Micros Chairman Tom Giannopoulos, who was CEO at the time, flew from Maryland to California to sign a deal with Oracle, only to have the transaction fall through, according to one person with knowledge of the matter.

Dealmaking in the technology space is accelerating as established software companies try to navigate the shift to cloud computing and fend off challenges from new competitors. This month, SanDisk Corp. agreed to buy Fusion-io Inc., which provides storage to Facebook Inc. and Apple Inc., for about $1.1 billion.

Oracle has long been an acquisition machine under Ellison, who is worth $46.6 billion and ranks eighth on the Bloomberg Billionaires Index. He led Oracle Team USA to victory in the America’s Cup last year and agreed in 2012 to buy most of the Hawaiian island of Lanai for an undisclosed sum.

Diversifying Deals

As rivals including Inc. that specialize in cloud computing have risen to the fore, Oracle has turned to purchasing firms that make software for specific industries, such as retail and hospitality, to diversify its offerings.

Oracle has spent $50 billion to acquire about 100 companies in the past decade. Of those, more than 20 have been geared at specific industries, including the 2010 acquisition of clinical- trial software maker Phase Forward Inc., and purchases of retailer-software makers ProfitLogic Inc. and Retek Inc. in 2005. In December, Oracle agreed to buy marketing-software maker Responsys Inc. for about $1.5 billion to court chief marketing officers.

Micros’s revenue totaled $1.29 billion in its fiscal 2013 and it has been growing in the low double-digit range for the past three years. The company is projected to generate $1.37 billion in fiscal 2014, which ends late this month, according to data compiled by Bloomberg.

Micros, which had more than 6,300 employees as of 2012, said on its website that more than 330,000 of its systems are installed in table and quick service restaurants, motels, hotels, casinos and other locations in more than 180 countries. Peter Altabef, a former Dell Inc. executive, has been CEO of Micros since January 2013 and Giannopoulos is now the chairman.

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