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Peter A. Sokoloff & Co. regularly analyzes transactions which occur within the industries covered. An archive of these case studies is kept online as a courtesy to our colleagues. To receive by e-mail new case studies as they are prepared, please e-mail bwalko@sokoloffco.com with your contact information.

Archives > Transaction Case Study #18

Oracle acquiring MetaSolv Software

Dear Colleague,

On October 23, 2006, Oracle (NASDAQ: ORCL) with $15.2 billion (ttm) in revenue announced that it has agreed to acquire MetaSolv Software, Inc. (NASDAQ: MSLV), a provider of service fulfillment operations support system (OSS) solutions for the communications and media industry, through a cash merger for $4.10 per share, or approximately $219.2 million. The offer constitutes a 23.5% premium over the $3.32 closing price Friday before the announcement on Monday.

MetaSolv, with $95 million (ttm) in revenue and EBITDA of $5.65 (ttm), is selling at an enterprise value (market cap less cash on hand) of $161.2 million. Thus the purchase price is equal to 1.7x ttm revenue and 28.5x ttm EBITDA.

The acquisition is the latest bid by Oracle to further extend its leadership in the communications industry. The company expects to create an end-to-end packaged software suite for key communications industry processes, including Business Support Systems (BSS), Operational Support Systems (OSS), Service Delivery Platform (SDP) and enterprise applications. Oracle currently supplies database technology and applications to over 90% of communications companies worldwide.

MetaSolv offers communications service providers OSS service fulfillment - including provisioning, network inventory and activation. MetaSolv's standards-based solutions support all types of services including next-generation IMS, VoIP, IPTV, IP VPN, broadband and mobile services, as well as traditional voice and data services.

"By adding a leading OSS application suite, Oracle plans to offer a fully integrated, end-to-end productized solution that will help service providers streamline the 'campaign to cash' process, optimize asset lifecycles and accelerate time-to-market of new products and services," said Bhaskar Gorti, Oracle Senior Vice President and General Manager of the Communications Global Business Unit. "Conventional, customized solutions have proven inefficient, inflexible and costly. Oracle is putting service providers in control to simplify their infrastructure, deliver more services faster and drive brand loyalty."

Curtis Holmes, president and CEO of MetaSolv, said on a conference call announcing the deal to MetaSolv analysts and media that all of MetaSolv’s customers currently are Oracle customers. He said MetaSolv brings Oracle OSS/BSS functions specifically focused in service provisioning, network inventory and service activation where it currently has a gap. MetaSolv’s offerings will become part of a software family that includes other properties acquired from PeopleSoft, Seibel Systems and Portal Software.

Holmes added that Oracle’s scale will help MetaSolv expand globally at a time when network operators worldwide are pursuing OSS transformation projects, but during which carrier consolidation and generally soft spending make it difficult for a large number of companies to effectively compete. “The deal is great timing as the industry goes through a massive transformation,” Holmes said. “This deal will allow us to accelerate our strategic mission. We’re really able to expand our profile in the global marketplace.”

After the closing of the transaction, MetaSolv's employees will join Oracle's Communications Global Business Unit. The agreement is subject to stockholder and regulatory approval and is expected to close in late 2006 or early 2007.

We hope that you find this feature from Sokoloff & Co. interesting, informative and useful.  We welcome your comments and suggestions. 

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