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Is an Oracle/SAP bidding war brewing for Responsys?

26 Dec

Larry Ellison is willing to pay $1.5 billion for email marketing software Responsys, but he might not get his way. Investors are betting that SAP will make a counter offer.

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Last week, Oracle Corp. announced it was planning to buy cloud marketing software vendor Responsys for $1.5 billion in cash, or about $27 per share, a 38 percent premium over the price at the time.

Great, except the price for Responsys’ stock immediately shot to $27.40, and its traded above $27 ever since. Buying at that price is a losing proposition if Oracle CEO Larry Ellison has his way. So what gives?

Investors are betting that the $27 per share price isn’t as set in stone as it might first appear. The deal is still subject to approval by the shareholders, and isn’t likely to close until early in 2014, which leaves space for another company to step in with a counter offer. The big contender here is arch rival SAP, which was reportedly also kicking the tires on Responsys before news of the Oracle deal broke, according to the Wall Street Journal. If an ensuing bidding war drives up the purchase price, suddenly getting in at $27.40 looks pretty lucrative.

Analysts have taken notice, and upped their price targets. In a research note, JMP Securities’ Pat Walravens, who follows the stock, set his target at $33, saying Oracle’s price is low compared to what other large enterprise software vendors have paid to get into the marketing space, so a counterbid wouldn’t surprise him. Salesforce, another big thorn in Oracle’s side, bought Responsys competitor ExactTarget for $2.6 billion in June. Even Adobe is in the mix, picking up the marketing automation company Neolane for $617 million that same month.

The marketing software space has heated up in recent months as more and more outbound marketing moves online — opening scale and efficiency opportunities for companies that use software to track, manage, and automate their campaigns. And while it might seem passe in the era of social media, email is still the preferred medium for many types of outreach. Hence, the interest by many old-guard enterprise software vendors looking to bulk out their offerings in a growth industry.

Regardless of what actually ends up happening with Responsys, all the buzz around its sale has already paid dividends across the marketing software space. Marketo, for instance, which is a Redwood City competitor to Responsys, shot up more than 15 percent on the news in $38.17 and has been trading in the high $30s ever since.

 

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