Oracle Corp to Buy Micros Systems: Largest Deal in 5 Years

Oracle Corp to Buy Micros Systems: Largest Deal in 5 Years

Oracle Corp has announced it will purchase Micros Systems in a deal worth $5.3 billion as the world's second most largest software maker looks to enhance growth through the acquisitions route.

Micros makes point-of-sale hardware and software for hotels and restaurants. It is the first multi-billion dollar acquisition by Oracle in the past 5 years. The software giant is being led by Larry Ellison and it is looking to boost fortunes following a less than satisfactory fourth-quarter results.

Analysts have indicated that this could be the first of a series of acquisitions for the company. Oracle has recently been hit by aggressive pricing by firms such as Workday Inc for software as well as Internet associated products. FBR Capital Market analyst Daniel Ives was quoted by Reuters as saying that “this is really Larry Ellison looking in the mirror realizing the need to get aggressive yet again on M&A”. The analyst also said that growth fuel is needed in the engine to catalyze growth in the top-line.

Micros deal is in line with Oracle's motivation to grow further in the rapidly expanding cloud business. Oracle has been a late entrant in this field. Micros sells Internet-connected cash registers to provide a host of cloud-based services including e-commerce and customer relationship management for restaurant chains and hotels. This includes well known clients such as Louvre Hotels and Yum Brands Inc.

Micros' full-year revenue rose by around 15% to $1.27 billion for the year ended June 2013. Oracle has slowed down when it comes to the slew of acquisition. Micros is easily the largest acquisition by this company since 2009. In the year 2009, Oracle had purchased Sun Microsystems for $5.6 billion.

Ives has predicted that this could be the start of an aggressive M&A cycle for Oracle as they move to spend $15 to $20 billion in acquisitions through the next 1 to 2 years. The deal is believed to be focused on cloud, big data and cyber-security.

The deal in question has probably come at the time when Oracle has the cash to spare. The company currently has $38.8 billion worth of cash and short-term investments making it an ideal time for it to strike the M&A scene with renewed vigor.

Oracle has announced that it offered Micros shareholders $68 per share which is a premium of 3.4% in the stock's Friday close. Shares of Micros Systems were trading at $67.97 and rose by 14% since the company announced news about the talks.

With Micros in its pocket, Oracle could play the right cards to ward off e-commerce software providers such as NetSuite.Inc and Demandware Inc. the transaction is expected to boost earnings soon. With enough sound-bytes and acquisitions, Oracle could be the on it way to become Number.1. following news of the proposed acquisition. Oracle shares went up by 0.7%.