Oracle will acquire Cerner, an electronic health record company, for US$28.3 billion.company Announcing an all-cash transaction On Monday, it was priced at $95 per share.
Arrived in a few days Wall Street Journal Report A deal will be finalized soon.Cerna’s As soon as the news came out, the stock price rose by 14%. But Oracle’s dropped by about 5%.
This acquisition will be the largest acquisition in Oracle’s history and will position it as a competitor to other technology companies entering the healthcare field.
“Through this acquisition, Oracle’s corporate mission is expanded to assume the responsibility of providing our overworked medical professionals with a new generation of easy-to-use digital tools that support access to information through a hands-free voice interface to protect cloud applications,” Oracle Chairman and Chief Technology Officer Larry Ellison Said in the press release.
Austin-based Oracle plans to expand the Kansas City Cerner health record system globally and use a voice assistant as the main user interface so that clinicians can enter records without typing on a computer.If this sounds familiar, it’s because Microsoft acquired Nuance earlier this year US$19.7 billion, plans to add more speech recognition tools to clinical documents.
Cerner will operate as a dedicated business unit under Oracle. The transaction is expected to increase in value from the first financial year. Oracle CEO Safra Catz compared the deal with Oracle’s acquisition of cloud computing company NetSuite in 2016, saying that Cerner will become “a huge additional revenue growth engine in the next few years.”
Cerner is one of the top EHR suppliers, second only to competitor Epic Systems in market share.The company has signed a large number of contracts with the U.S. Department of Defense and the Department of Veterans Affairs, but has also undergone some changes, including the appointment of a new CEO David Feinberg and efforts Increase data analysis efforts.
How will they come together?
Analysts said that given Oracle’s interest in developing its healthcare business, and both companies have similar end users, the deal makes sense. For example, some of Oracle’s healthcare clients include Kaiser Permanente, Cleveland Clinic, and Mayo Clinic.
In general, the biggest question is how the two companies will come together. Although Oracle is no stranger to acquisitions, analysts have expressed some concerns about the size of the transaction and whether the company needs to expand its net debt. William Blair analyst Jason Adler wrote in a research report that the company currently has $56 billion in net debt, mainly due to its aggressive stock buybacks. He also pointed out potential integration issues, “including technical and cultural aspects.”
Charles Rhyee, managing director of Cowen and Company, wrote in a research report that one of Cerner’s clinical systems is currently running on an Oracle database, making it a natural strategic choice.
On the other hand, Cerner established a multi-year partnership with another cloud provider AWS in 2019. Morgan Stanley wrote that the company has placed its HealtheIntent and CareAware applications on the AWS cloud and has been transferring its Millennium EHR to AWS. Managing Director Ricky Goldwasser in a research report.
“We believe these features can be replicated in Oracle’s cloud environment, but this may require heavy work,” he wrote.
Another question is how Oracle will handle Cerner’s business after the transaction is completed.
He added: “Oracle has a good track record in optimizing the profit margins of acquired companies, but a key risk is that if they cut too deeply, it will hinder future growth opportunities.” “We think Oracle’s potential acquisition The strategic premise is focused on Cerner’s health system relationships and the value it brings to large cloud providers. However, we still have questions about the extent to which potential acquirers can monetize the data, which is owned by the hospital system, not Cerner. “
Analysts pointed out that Oracle has an interesting opportunity to use its existing relationship with the health system to cross-sell its cloud services to some of Cerner’s customers.Recently, Cerner has taken steps to provide more data analysis, including Launch of a new business unit called Enviza, Focused on clinical trial research, and acquired Kantar Health.
Rhyee pointed out that Oracle could merge its life sciences business with Enviza.
“This is a rapidly growing and fragmented market,” he wrote. “Given (Cerner)’s position in the healthcare field, we can also see (Oracle) pushing to provide cloud services for healthcare companies.”
The transaction is expected to be completed next year, but first must be approved by regulators and Cerner shareholders.
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