Oracle to buy Cerner for US$28.3B in bold move on health

Oracle agreed to acquire medical-records systems provider Cerner for about US$28.3 billion, a deal that would add a broad customer base in the health-care industry to bolster the software maker’s cloud-computing and database businesses.

Oracle Corp. agreed to acquire medical-records systems provider Cerner Corp. for about US$28.3 billion, a deal that would add a broad customer base in the health care industry to bolster the software maker’s cloud-computing and database businesses.

The all-cash transaction, Oracle’s biggest-ever deal, will see Oracle pay US$95 a share, the companies announced Monday in a statement. The price represents a 20 per cent premium over Cerner’s market value last Thursday, before the deal talks first became public. Oracle shares slid 4.3 per cent at 1:40 p.m. Monday in New York, while Cerner shares gained less than 1 per cent to US$90.57.

Oracle Chief Executive Officer Safra Catz said the acquisition should be “immediately accretive to Oracle’s earnings” on an adjusted basis in the first full fiscal year after closing and contribute “substantially more to earnings in the second fiscal year and thereafter.” The transaction is expected to close next year, the companies said.

Oracle, the second-biggest software maker by revenue, is best known for legacy database products. The company has struggled in recent years to gain ground in cloud computing, in which companies rent data storage and analytic power from large server centers, trailing far behind market leaders such as Amazon.com Inc. and Microsoft Corp.

The deal for Cerner gives Oracle a huge foothold in technology for the health care industry -- a sector expected to spend US$15.8 billion on cloud infrastructure and software by 2023, according to market researcher IDC -- given Cerner’s robust user base, which includes many of the top U.S. hospital systems. And as Oracle moves more of Cerner’s systems onto its own cloud infrastructure, the company gains an important case study to help future sales. 

“Data is where it’s at in health care. The ability to not just have a customer and an increased footprint, but to showcase Oracle’s database capabilities is a big thing for them,” said Rebecca Wettemann, CEO at advisory firm Valoir.