Oracle, NetSuite Have a Week to Get $9.3 Billion Deal Done

Oracle CEO Mark Hurd says the company has made its final offer, but large NetSuite investor T. Rowe Price wants another $2 billion added to the bid.

Oracle CEO

Oracle has set a deadline of Nov. 4 for NetSuite shareholders to accept its $9.3 billion bid for the cloud software provider, and it may take that long to know for sure whether the deal will come off.

Oracle CEO Mark Hurd said this week in an interview on CNBC that the enterprise software giant had no plans to increase its pitch for NetSuite, adding that the company was ready to walk away from the proposal if NetSuite shareholders chose not to sell their stakes to Oracle.

"It's done from our perspective," Hurd said when asked about the state of the bid. "It's our best and final offer."

However, officials with T. Rowe Price, NetSuite's largest independent shareholder, sent notices to both Oracle and NetSuite that they wanted another $2 billion added to the offer before they would consider supporting the deal. Oracle is offering $109 per share, about 10 percent more than NetSuite's stock price, according to Bloomberg. T. Rowe Price officials are looking for Oracle to up that to $133 a share.

The investment firm had informed NetSuite in September that it planned to oppose the deal. By Oct. 6, Oracle had only 22 percent of the shares it needs to complete the deal, and officials extended the deadline to Nov. 4.

However, Oracle's Hurd said that the company is ready to move on from the bid should NetSuite investors spike the deal, which had been agreed to by the boards of directors for both vendors.

"We'll move onto other things," he said. "We're going to move onto executing our strategy. … We'll abide to what the shareholders say."

Oracle officials see NetSuite as an important addition to its rapidly growing cloud strategy, bringing with it more software-as-a-service (SaaS) capabilities. At the same time, it would give Oracle greater reach in the important midmarket space, where NetSuite is a significant player and Oracle would like to have a greater presence.

The two companies already have close ties. NetSuite was started by CEO Zack Nelson, who in the 1990s led marketing efforts for Oracle. In addition, Oracle founder, Chairman and CTO Larry Ellison, through various entities, owns more than 40 percent of NetSuite's stock. In initially opposing the deal, T. Rowe Price officials reportedly cited perceived conflicts of interest as a key concern.

Part of the offer from Oracle called for the majority of NetSuite's outstanding shares not owned by executive officers or directors of NetSuite or by people affiliated with Ellison, his relatives or affiliated entities to be tendered.

Oracle officials have been vocal about the company's ambitions to become a cloud player on the level of Amazon Web Services and have been aggressive in building out the company's cloud capabilities, particularly in the areas of SaaS and platform-as-a-service (PaaS). Earlier this month, the company unveiled the Oracle Bare Metal Cloud Services offering, a move that bolsters its presence in the infrastructure-as-a-service (IaaS) area of the cloud.

In the company's first financial quarter, Oracle saw combined SaaS and PaaS revenues grow 77 percent year-over-year, to $798 million. Throw in IaaS revenue, and that number jumps to $969 million, a 59 percent increase from the same period last year. In NetSuite's third quarter, the company's revenue hit $243.9 million, a 26 percent increase year-over-year but coming up short of analyst estimates.

Even without NetSuite, Hurd said he is comfortable with where Oracle's cloud business is.

"Our growth rate is pretty high, driven a lot by apps and by platforms, so we're really happy with our growth in the cloud," he said.

Hurd also stressed the growth opportunities in the cloud. The enterprise IT market is about $1 trillion, he said, and currently only $40 billion to $50 billion of enterprise IT is in the cloud.

"There is a lot to come," he said.