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By Jay Greene 

Oracle Corp. agreed to buy NetSuite Inc. for $9.3 billion, bolstering the software maker's cloud-computing offerings as it races to catch up to rivals.

Oracle said is paying $109 in cash, a 19% premium to NetSuite's closing price Wednesday of $91.57. The deal is expected to close in 2016, subject to regulatory and shareholder approval.

The deal, among the largest in Oracle's history, reunites Chairman Larry Ellison with Zach Nelson, NetSuite's chief executive, who ran Oracle's marketing operations in the 1990s. Mr. Ellison is NetSuite's largest investor; entities owned by Mr. Ellison and his family held nearly 40% of NetSuite's shares, according to NetSuite's annual proxy statement filed in April. Much of his net worth is also tied up in Oracle, which he co-founded in 1977.

Mr. Ellison's position on both sides of a deal between two publicly traded companies raises questions about potential conflicts of interest. While Oracle declined to address the matter, it said in its press release the deal will only close if a majority of NetSuite shares not owned by Mr. Ellison and his family approve the deal.

The Ellison family's stake in NetSuite means chances for a rival bidder to emerge are "slim to none," said Stifel Nicolaus Co. analyst Brad Reback. Given the multiple Oracle offered -- about nine times the next 12 months' projected revenue -- shareholders may be hard-pressed to demand a better deal, he said.

The acquisition had been rumored for weeks, pushing NetSuite's shares up from $72.19 just a month ago. The deal represents a premium, though it is still below NetSuite's closing price of $115.57 in February 2014.

In morning trading, NetSuite rose 18% to $108.17, while Oracle shares was up less than a percent to $41.04.

Both companies provide business applications called enterprise-resource planning software. NetSuite, though, is among the leaders in providing those offerings to customers via subscription-based, on-demand computing.

Oracle said it plans to invest heavily in both products, and that the deal would immediately add to its earnings, on an adjusted basis. In a statement provided to The Wall Street Journal, Chief Executive Mark Hurd said Oracle would "accelerate the pace of innovation" and "expand the global reach" of NetSuite.

Oracle declined to say whether the deal would lead to any executive changes or layoffs. NetSuite didn't immediately respond to a request for comment.

While the companies offer some overlapping products, NetSuite has made inroads with smaller corporate customers, where Oracle hasn't been as strong, Mr. Reback said. NetSuite, whose international sales are modest, will benefit from Oracle's global sales operation, he said.

While Oracle has improved its homegrown cloud products, it is battling companies such as Salesforce.com Inc. and Workday Inc., which deliver software and storage solely on the web. Oracle also is fighting to keep pace with giants including Microsoft Corp. and Amazon.com Inc., which have built large businesses running customers' computing operations in the cloud.

Separately, NetSuite also reported its quarterly results. Revenue in the second quarter rose 30% to $230.8 million, but its loss widened to $37.7 million from $32.3 million in the year-ago period. Excluding certain costs, such as expenses related to stock-based compensation, NetSuite's earnings rose to $6.6 million, or 8 cents a share, from $1.7 million, or 2 cents a share.

Analysts surveyed by Thomson Reuters were expecting earnings of 3 cents a share on revenue of $231 million.

Oracle is an aggressive acquirer. spending more than $1 billion in recent months to buy Opower Inc., which makes cloud software for the utility industry, and Textura Corp., which provides similar services for construction businesses.

The largest recent multibillion deal was Oracle's $5.3 billion purchase in 2014 of Micros Systems Inc., which sells internet-connected cash registers.

Oracle's other big acquisitions include its acrimonious hostile takeover of PeopleSoft Inc. for $10.3 billion in 2004, another hostile purchase of BEA Systems Inc. for $8.5 billion in 2008, and its 2009 deal to buy Sun Microsystems Inc. for $7.4 billion.

Write to Jay Greene at Jay.Greene@wsj.com

(END) Dow Jones Newswires

July 28, 2016 11:09 ET (15:09 GMT)

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