Oracle Corp. has agreed to buy Siebel Systems Inc. for $10.66 per share. The offer is valued at approximately $5.85 billion, or $3.61 billion net of Siebel's cash on hand of $2.24 billion. The move is seen as a way of strengthening both companies’ position in the market for customer relationship management (CRM) applications, a niche Siebel once dominated but that is now increasingly seen as the province of enterprise software giant SAP as well as Salesforce.com, a company that sells hosted services rather than software.
CRM applications capture and streamline all customer interactions so CRM users can better understand, service and anticipate their own customers' needs. One analyst firm, IDC, estimates that the CRM market was worth $8 billion in 2004 and expected to grow to $10 billion by 2009. Siebel's CRM and Oracle's enterprise applications and middleware share an architecture that embraces industry standards, and a significant majority of Siebel's implementations run on the Oracle database.
“This is a customer-driven event. Our joint customers have consistently recommended this transaction to both companies for over a year,” explains Charles Phillips, co-president of Oracle. “We will embrace Siebel's best-in-class CRM products and make the features of those products the centerpiece of our Project Fusion CRM.”
“We expect this transaction to be accretive to Oracle's earnings on a non-GAAP basis in its first full year (FY07),” says Greg Maffei, co-president and CFO of Oracle. “Longer term, Siebel will contribute to Oracle's stated goal of 20% annual earnings growth. Given the size of our existing R&D investment, scale of our global support infrastructure, and similarity of our back office requirements, we will recognize substantial efficiencies from combining our two businesses."
The board of directors of Siebel Systems has voted in favor of the transaction, and Tom Siebel has agreed to vote his shares in favor of the acquisition. Siebel stockholders will convene in a special meeting to vote on the acquisition. Oracle stockholder approval is not required. While the transaction and the timing are subject to regulatory approvals, the deal is expected to close in early 2006.
