Bank Of America Sees NetSuite Stock Dipping To $68 If Oracle Deal Falls Through

Oracle Corporation ORCL entered into a definitive agreement on September 28 to acquire NetSuite Inc N for $109 per share or $9.3 billion.

Kash Rangan of Bank of America Merrill Lynch reinitiated coverage of NetSuite at an Underperform rating and price target of $68.

Risks To The Deal

“Oracle has extended the tender offer to a final Nov. 4 tender on opposition for the deal from the largest public shareholder and has set minimal tender hurdle of 50+ percent of unaffiliated shares to consummate the deal or 20.4 million shares,” Rangan mentioned.

The original tender expired on October 6, at which time 4.6 million unaffiliated shares were to be tendered.

Stock Valuation

The analyst believes if Oracle’s offer falls through, NetSuite’s share price could decline to $68, representing 33 percent downside risk from the current levels.

However, if the deal were to go through at $109 per share, it would represent an 8 percent premium.

Rangan also expressed concern regarding the weaker Q3 billings reported by NetSuite, stating that historically, “weakness at target business has caused a lower offer.”