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Oracle buys Sun amid M&A frenzy, including LCH.Clearnet battle

The recession is spurring on merger and acquisition activity with the board of Sun Microsystems agreeing to a $7.4 billion bid from Oracle, after earlier talks with IBM fell through. Meanwhile, Euroclear has completed its takeover of the International Capital Markets Association subsidiary Xtraker, which runs a trade matching and reporting system for fixed income business, while SAP has purchased real-time billing provider, Highdeal and Clear Standards, which produces carbon management solutions. Sungard is not missing out as company valuations fall in the recession either, buying the ICE Risk trading solution from IntercontinentialExchange for an undisclosed sum. It plans to add it to its Kiodex web-based community trading and risk Software-as-a-Service offering to provide exchange connectivity, valuation and risk capabilities.

Undoubtably the biggest recent deal, however, is Oracle’s $7.4 billion purchase of Sun which, as the CEO Larry Ellison says, has the potential “to transform the IT industry, combining ‘best in class’ enterprise software and mission-critical computing systems”. Ellison adds that it will make Oracle “the only company that can engineer an integrated system – applications to disk – where all the pieces fit and work together so customers don’t have to do it themselves. Our customers benefit as systems integration costs go down.” The deal means Oracle gets Sun’s Java and Solaris software, giving this claim substance, although of course the losing bidder, IBM, would dispute the ‘only’ assertion.

Oracle claims that Java is “the most important software it has ever acquired”. Its fastest growing business, Oracle Fusion Middleware, assisted by its earlier purchase of BEA, is built upon it and the firm says it will continue to invest in Java technology and its community. The Sun Solaris operating system is the leading platform for the Oracle database, so there are obvious synergies there as well.

The deal, which will affect the technology used by numerous financial institutions, has been unanimously approved by the Sun board and is expected to close this summer, subject to stockholder and regulatory approval. Oracle will pay $9.50 per share, a 42 per cent premium on the closing price of 17 April, when the deal was announced, valuing the acquisition at $5.6 billion net of Sun’s cash and debt.

• In other news, the Depository and Clearing Corporation has called off its proposed transatlantic merger with LCH.Clearnet after failing to reach a suitable accord, following the heads of agreement that was signed between the firms last year. The withdrawal of DTCC left the field clear for a consortium of 11 banks, led by inter-dealer broker ICAP, to make a EUR830 million bid for the London-based clearer.

The latter proposed link-up is likely to be looked upon more favourably by European regulators, who would prefer oversight to remain under EU jurisdiction, making the ICAP-led consortium the strong favourite to win this particular battle.

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