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.

Autonomy and Art Technology: Lower after raising

Contact: Brenon Daly

There’s money, and then there’s expensive money. To underscore the difference, consider a pair of recent money-raising offerings from notably acquisitive companies. First, the worst. Art Technology Group announced earlier this month that it intended to hold a 25-million-share secondary, with an undisclosed portion of it earmarked for possible acquisitions. The plan didn’t find many fans on Wall Street, who carped about a profitable company adding 25 million additional shares on top of a base of about 135 million.

Art Technology shares promptly went into a tailspin. By the time the e-commerce firm had priced them, investors had clipped 22% off the stock. So instead of raising about $113m, the vendor had to settle for $88m (excluding overallotments). Even though Art Technology had to take a haircut on the secondary, it did at least get it done. With it, the debt-free company more than doubled the amount of cash it has on hand and could be a serious consolidator in the market. Already this year, Art Technology made a rather smart purchase of InstantService, a startup providing customer service through online chat and email.

And, although the reaction wasn’t nearly as severe, Autonomy Corp also took a mild hit from its investors when it announced plans to raise some $785m in a convertible offering last week. Adding those proceeds into its already well-stocked treasury will give Autonomy more than $1bn to go shopping with, although some of that will have to go to pay for its earlier Interwoven acquisition. Over the past three years, Autonomy has picked up five companies for a total of $1.2bn, although Interwoven accounts for two-thirds of the aggregate spending. As to what Autonomy might be looking to buy with its newfound riches, my colleague Nick Patience says in a recent report that he could imagine Autonomy going into marketing automation and BI, and he even has a few names that could well be on Autonomy’s shopping list.