Oracle Buying Sun Microsystems for $7.4 Billion as IBM Abandons Bid
After IBM made the decision to abandon their bid to buy Sun Microsystems, Oracle has stepped up to the plate and will now be acquiring the networking equipment maker in a cash deal valued at $7.4 billion. Oracle will purchase Sun shares at $9.50 each, which represents a 42% premium to Sun's closing stock price on Friday of $6.69.
IBM had offered to buy Sun at $9.40 per share. Acquisition talks fell through earlier this month after Sun cancelled IBM's exclusive negotiating rights, and then IBM withdrew their offer.
Oracle is anticipating that the purchase will add at least 15 cents per share to its adjusted earnings in the first year after the deal closes. They also estimate that Sun will contribute more than $1.5 billion to Oracle's adjusted profit in the first year, and more than $2 billion in year two.
Sun's board of directors has approved the transaction, and Oracle is expecting to close the deal this summer.
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A survey conducted by
A survey conducted by Citigroup amongst major institutional investors provided the following insight on todays markets:
The favored sector is Tech and this sector has held the top position over the last 12 months. Growth stocks are also a hot item of late, the market sees the economy in a more positive view for the second half of the year and this should bode well for growth stocks. An additional upside of 6% is expected from current market levels to the end of the year. The majority of this optimism is due to the market rally since March, investors believe the market has bottomed. Regardless of the expected drop (approximately 20%) in earnings this year, a common consensus is the rebound in 2010 will be in the double digits. I’m certain Oracle has this information in mind prior to its acquisition.
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