Oracle goes shopping in e-commerce

Contact: Brenon Daly

Oracle says it will pay $1bn in cash for Art Technology Group, the second public company the consolidator is set to erase from the Nasdaq so far this year. Terms call for Oracle to shell out $6 for each of the roughly 165 million shares outstanding for ATG. That represents a 46% premium over ATG’s closing price in the previous session and the highest price for the stock since 2001, and almost twice the level it was trading at in August. (ATG also got roughed up on the market in February, when it did a secondary offering.)

Although investors weren’t thrilled with the dilution, the secondary did essentially double the company’s cash on hand. Backing out that amount gives the proposed transaction an enterprise value of $850m. That’s 4.25 times ATG’s projected 2010 sales of $200m – a fairly rich multiple for a company that was growing at 11-12%. We suspect that the premium came because Oracle had to top another bidder. In our minds, the most likely other suitor would be Autonomy Corp. Morgan Stanley advised ATG on the deal, which is expected to close early next year.