Oracle Corporation Will Finance Micros Deal With Bond Issue

Oracle Corporation Will Finance Micros Deal With Bond Issue
By Sanatan2014 (Own work) [CC BY-SA 4.0], via Wikimedia Commons

Larry Ellison’s Oracle Corporation (NYSE:ORCL) announced a $10 billion seven-part benchmark bond issue to pay for the $5.3 billion acquisition of MICROS Systems, Inc. (NASDAQ:MCRS) that was closed last week, Bloomberg News reports. The bond issue will include three and five-year floating rate notes, and five, seven, 10, 20, and 30-year fixed-rate bonds, and the extra cash will likely be used to rollover older bond issues and pay for stock buybacks. Oracle said that it intends to sell its ten-year bonds for about 100 basis points more than 10-year Treasuries, but final pricing hasn’t come in yet.

Play Quizzes 4

Oracle has been buying growth for a decade

Oracle has been chasing growth through M&A for years, with $50 billion spent on roughly 100 acquisitions in the last decade. Even with all those purchases, sales growth has been capped at 4% for the last eleven quarters, sometimes going negative, as the shift to cloud services leaves the tech giant behind.

Is First Gen An Overlooked Power Play That Deserves A Re-Rating?

environmental 1651092002The post was originally published here. Highlights: Resolving gas supply issues ensures longevity A pioneer in renewable energy should be future proof Undemanding valuation could lead to re-rating Q1 2022 hedge fund letters, conferences and more

But even with so many recent acquisitions, and plans to pick up a handful of more companies before the end of this year, the MICROS Systems deal is the largest since Oracle bought Sun Microsystems in 2010. Taking advantage of the historic low interest rates makes sense, but when the rest of the company is still struggling after it missed the transition to cloud computing, investors may be skeptical that tacking on another company will turn things around.

Oracle ended the day down slightly, but there wasn’t enough of a price move to say that the market strongly reacted to the announcement. Considering Oracle issued $3 billion last year in a three-part sale, investors probably expected some sort of security issue to be announced and had already priced it into the stock.

Oracle tumbled after earnings miss, while MICROS share went through the roof

Oracle had a rough March just like the rest of the tech sector (and a rough February like the rest of the market), but it recovered and was back on trend until it reported an earnings miss earlier this month, just as MICROS Systems shares were soaring so high that trading had to be halted. Whether investors think the acquisition will help Oracle rebuild sales growth or just destroy value is being overshadowed over disappointment over weak 2013 numbers, but Micros shareholders are clearly thrilled to be paid a premium for their company.

Updated on

Michael has a Bachelor's Degree in mathematics and physics from Boston University and Master's Degree in physics from University of California, San Diego. He has worked as an editor and writer for several magazines. Prior to his career in journalism, Michael Worked in the Peace Corps teaching math and science in South Africa.
Previous article The Wisdom Of The Stoics By Henry Hazlitt
Next article Apple Inc. Hiring Managers For New Retail Stores In China

No posts to display