Silicon Valley giant Oracle Corp. plans to acquire Columbia-based Micros Systems Inc. for $5.3 billion in a deal executives and industry observers said could generate local job growth instead of the typical corporate consolidation.
In the deal announced Monday, Oracle offered $68 per share for Micros, about 20 percent more than the shares traded for before rumors of the deal began circulating last week.
Oracle would gain the company's stable of brand-name customers, growth opportunities and niche technology processing sales in the hotel, restaurant and retail industries. Micros' board of directors unanimously approved the transaction, expected to close by year's end.
Micros would join a growing list of Baltimore-area public companies to disappear from stock exchanges, absorbed by out-of-town rivals, as Jos. A. Bank Clothiers, Constellation Energy Group, Sourcefire and Black & Decker have been in recent years.
But executives assured local officials they expect the deal to drive job growth, citing Micros' pending deal to buy its Columbia Gateway headquarters. Micros employed about 900 people at four locations in Maryland and 6,500 people worldwide at this time last year.
Local economist Anirban Basu, of Sage Policy Group, said those pledges ring true, given that the companies' offerings largely do not overlap and that Micros appears to be deepening roots at its headquarters. But the deal still suggests that Maryland is unable to support major public companies, he said.
"Why is it that Maryland is able to produce companies like Micros, Sourcefire and MedImmune, and those companies are gobbled up?" Basu asked.
Micros CEO Peter Altabef said the deal would give the company's customers access to more services through Oracle's offerings. Founded in 1977, Micros makes point-of-sale hardware and software used at 330,000 restaurants, hotels and retail stores in 180 countries. It moved its headquarters to Columbia from Beltsville in 2000.
"In combination with Oracle, we expect to help accelerate our customers' ability to innovate and differentiate their businesses by utilizing Oracle's technologies, cloud solutions and scale," Altabef said in a statement. "We are very excited about the great opportunities this will create for our customers and employees."
Oracle officials, meanwhile, said they looked forward to gaining Micros' foothold in the restaurant, hotel and retail industries. The multinational firm says it is the world's second-largest software company behind Microsoft, with $27.8 billion in sales in its most recent four quarters. Oracle specializes in hardware and software used to manage massive amounts of data.
Micros' customers include restaurants like Burger King, Panera and Subway and hotel brands including the Four Seasons, Hyatt and Marriott. It also sells point-of-sale systems used on cruise ships and in casinos, airports and sports arenas, including M&T Bank Stadium, Fenway Park and Nationals Park.
Micros' management and employees will form a distinct business unit within Oracle, officials said. The deal is Oracle's largest since it bought Sun Microsystems for $5.6 billion in 2009.
Its closing is subject to Micros stockholders tendering a majority of the company's outstanding shares, as well as regulatory approvals. Micros' largest shareholders are investment firms including Value Act Capital, Neuberger Berman Group and Blackrock Inc. Neuberger Berman and Blackrock officials declined to comment. Value Act officials did not respond to a request for comment.
Neither Micros nor Oracle made executives available for interviews on Monday.
Howard County Executive Ken Ulman said a Micros executive who called him Monday indicated the deal would not detract from the company's presence in Columbia.
"Micros executives have given me strong assurance that Oracle is committed to the great business based here, and expects to grow and continue to add jobs," Ulman said in a statement. "I know that Micros is completing a real estate transaction in Howard County, and that will continue. We welcome Oracle and look forward to working together to strengthen their investment in Howard County."
Micros plans to pay $59.5 million in cash to buy the 250,000-square-foot building it occupies on Columbia Gateway Drive from Wells REIT II, an affiliate of Atlanta-based real estate investor Columbia Property Trust, according to Securities and Exchange Commission filings. The property sale is expected to close July 1.
Oracle's acquisition of Micros follows Cisco Systems' $2.7 billion purchase of Columbia cybersecurity firm Sourcefire last year.
Lawrence F. Twele, CEO of the Howard County Economic Development Authority, called the deals a sign of the county's strong business climate.
"We expect this deal to lead to job growth in the county, and it also means a major presence for another Silicon Valley-based company here in Howard County," Twele said in an email. "It affirms our belief that Howard County is one of the places to be for innovation and growth in the technology sector."
Analysts said the deal was a good one for both Oracle and Micros because the strengths of each complemented the other's well.
While Micros has led its market domestically for the past decade, its business in emerging international markets exists through international chains based in the U.S. and Europe, said Gil Luria, an analyst with Wedbush Securities in Los Angeles. Oracle's reach could help extend that, he said.
"I think this will be an opportunity for Micros to accelerate its growth," Luria said.
Acquiring Micros gives Oracle a needed avenue for growth in the retail industry, as well as a cloud-based technology that helps companies organize and manage relationships with customers, said Daniel Ives, a research analyst with FBR Capital Markets.
Micros shares closed Monday up 3.4 percent at $67.98 — just under Oracle's offer price. Oracle shares rose less than 1 percent to $41.10 Monday.
Ives said he expects Oracle to invest in and focus on those areas of Micros' business that can help drive growth, and to de-emphasize and possibly discontinue other parts that it deems less central.
"When they make acquisitions, they focus and bulk up pieces that are working and are more strategic or valuable," Ives said. "That's sort of been their recipe over the last decade."
There are few, if any, overlapping business activities between the two companies, Luria said.
"All of Micros' businesses are actually relevant to Oracle," he said. "I don't see a part of it that would necessarily need to be cut when Oracle takes over."
Micros would be at least the fifth Baltimore-area company to disappear from stock listings after being acquired in recent years. Men's Wearhouse closed a deal this month to buy Hampstead-based Jos. A. Bank for $1.8 billion, ending a back-and-forth bidding war between the rivals.
Chicago-based Exelon Corp. closed a $7.9 billion deal to buy Constellation Energy and subsidiary Baltimore Gas and Electric Co. in 2012.
The Stanley Works merged with Towson-based Black & Decker in a $4.5 billion stock deal in 2010. The companies formed Stanley Black & Decker, a company based in Stanley's hometown of New Britain, Conn.
By the numbers
Micros Systems Inc.
Employees: 900 in Maryland, 6,500 worldwide
Fiscal 2013 revenue: $1.3 billion
Business: Sells point-of-sale software and hardware systems used in restaurants, hotels and retail stores around the world
Headquarters: Redwood City, Calif.
Fiscal 2013 revenue: $37.2 billion
Business: Manufactures, hosts and supports database software and hardware systems; licenses various other types of software used to manage business processes, human capital, project portfolios, risk, procurement, etc.Copyright © 2014, The Baltimore Sun