Wall Street Journal: Oracle in Late-Stage Talks to Acquire Cerner

Dec. 17, 2021

On Thursday, the Wall Street Journal reported exclusively that the Austin, Tex.-based Oracle Corporation is in talks to acquire the Kansas City-based Cerner Corporation, in a potentially $30-billion deal

Mark Hagland

Late in the day on Thursday, Dec. 16, the Wall Street Journal’s Cara Lombardo and Dana Cimilluca reported exclusively that the Austin, Tex.-based Oracle Corporation is in talks to acquire the Kansas City-based Cerner Corporation.

The report, posted at 6:35 PM eastern time, began thus: “Oracle Corp. is in talks to buy electronic-medical-records company Cerner Corp., according to people familiar with the matter, a deal that could be worth around $30 billion and push the enterprise-software giant further into healthcare. An agreement could be finalized soon, some of the people said, assuming the talks don’t fall apart or drag out. Should a deal come together, it would rank as the biggest ever for Oracle, which has a market value of more than $280 billion. Kansas City, Mo.-based Cerner designs software that hospitals and doctors use to store and analyze medical records and other healthcare data. It has a market value of around $23 billion. With a typical takeover premium, a deal would be expected to value the company at something like $30 billion, though exact terms being discussed couldn’t be learned. Oracle, a Silicon Valley veteran that last year moved its headquarters to Austin, Texas, is one of the biggest software providers to other companies and organizations.”

The article noted that Cerner “has a market value of around $23 billion. With a typical takeover premium, a deal would be expected to value the company at something like $30 billion, though exact terms being discussed couldn’t be learned.”

The article also noted that “Oracle shares closed Thursday at $103.22, down slightly amid a broad-based tech selloff and just off an all-time high reached the day before. They jumped over 15% last week when the company reported fiscal-second-quarter results that topped estimates and Chief Executive Safra Catz reiterated the expectation that full-year revenue growth would accelerate from the year earlier. Ms. Catz, who became the sole CEO in 2019, said she expects the company’s operating margins to be the same or better than they were pre-pandemic.”

According to its website, Cerner’s 2020 revenues totaled $5.5 billion; and the company had more than 26,000 employees; and

In its third-quarter earnings report, issued on Oct. 29, Cerner reported:

• Revenue of $1.468 billion, up 7% compared to $1.369 billion in the third quarter of 2020.

• GAAP operating margin of 15.3%, down from 30.1% in the year-ago quarter, which included $217 million of gains on the sale of businesses.

• Adjusted Operating Margin (non-GAAP) of 21.9%, up 150 basis points from 20.4% in year-ago quarter.

• GAAP diluted EPS of $0.59, down 49% compared to $1.16 in year-ago quarter.

• Adjusted Diluted EPS (non-GAAP) of $0.86 up 19% compared to $0.72 in year-ago quarter.

• GAAP cash flow from operating activities of $435 million, up 14% compared to $382 million in year-ago quarter.

• Free Cash Flow (non-GAAP) of $312 million, up 32% compared to $237 million in the year-ago quarter.

On Dec. 10, Cerner announced that “[I]ts board of directors declared a cash dividend to stockholders of $0.27 per issued and outstanding share, up 23 percent from the prior quarterly dividend of $0.22. The cash dividend will be payable January 11, 2022, to shareholders of record as of the close of business December 27, 2021.