Oracle, the US technology group, on Monday agreed to buy Siebel Systems for $5.85bn in cash and stock, sealing its second large acquisition in less than a year. The purchase will establish Oracle as the world's largest provider of customer relationship management (CRM) software and reunite two of Silicon Valley's most well-known executives.
Thomas Siebel, who established Siebel in 1993 after a career at Oracle, will return to his former employer to help execute the merger.
For Larry Ellison, Oracle's chief executive, the acquisition will cement his reputation as a prolific dealmaker. In December, Oracle agreed to buy PeopleSoft for about $10.5bn, after winning an 18-month takeover battle, seeing off a high-profile, antitrust suit brought by the US Department of Justice.
Mr Ellison on Monday suggested the company's attention would now be focused on integration. “I don't think you'll see another major acquisition any time soon,” he said. The purchase of Siebel will give Oracle access to 3.4m users and 4,000 corporate customers of its CRM software, which helps companies track sales, marketing and customer service.
Both Oracle and Siebel said the tie-up was encouraged by a number of key customers, including General Electric. “There was a shift in market dynamics,” said Mr Siebel, who added that customers now preferred an “integrated family of applications that minimises their cost structure”. Although CRM is one of the fastest growing segments of the software business, Siebel had been struggling to compete, leading to lower profits and prompting a group of investors mostly hedge funds to press management into pursuing a sale.
Mr Ellison shrugged off comments from one analyst who said Siebel was suffering from poor customer satisfaction. In Oracle's due diligence, Mr Ellison said: “Siebel customers seem to be quite happy with the product.”
Siebel shareholders will receive $10.66 a share in cash for each Siebel share, unless they elect to receive Oracle stock. That price represents a 17 per cent premium to Siebel share price on Friday, which had already moved higher as investors bet that a takeover was near.
Wall Street investors appeared to offer timid approval, sending Oracle shares 1.43 per cent higher closing Monday’s trading day at $13.47. The final price of the deal will be reduced by $2.2bn, the value of Siebel's cash.
Oracle said the deal would enhance earnings in 2007 and contribute to its stated goal of lifting profits by 20 per cent per year. The acquisition would be funded using a combination of Siebel's cash, Oracle's cash, and borrowing of up to $3bn.
Morgan Stanley advised Oracle, and Goldman Sachs advised Siebel.