Before investors get too aggressive on rumors about the likelihood of Salesforce.com being acquired, they better take at least a minute to consider the caveats or risks associated with this versus the possibilities.
First off, the other likely acquirer that would be competing in a bid would have to include Microsoft Corp. (NYSE: MSFT), Satya Nadella has been marching toward cloud computing and mobile. Well, with the CRM offerings a company like Salesforce.com would make sense. The question is of course at what price.
Salesforce.com has always been considered a potential takeover target, with Oracle as the most likely suitor. After all, Marc Benioff used to be with Oracle — and he has a rivalry with Larry Ellison. Ellison had been, or is, a holder of Salesforce.com shares after backing the company. And despite a serious rivalry, Salesforce.com and Oracle also have a strategic partnership with each other.
The problem that has always gotten in the way is that Salesforce.com’s stock has a market value that was already about $42 billion or so before the rumors broke — then it was $47.5 billion or so after the rumors. On top of that, Salesforce.com has had nosebleed market valuations forever. It just never trades at under 100-times expected earnings, or if so not for very long. It is also expensive against revenues, with a 7.2 multiple on that front for expected current year revenues that is.
So, what about that $10 billion capital raise by Oracle? A 424B2 filing with the Securities and Exchange Commission hit the tape on Wednesday. It turns out that this $10 billion deal has the following tranches:
- $2,500,000,000 2.500% Notes due 2022
- $2,500,000,000 2.950% Notes due 2025
- $500,000,000 3.250% Notes due 2030
- $1,250,000,000 3.900% Notes due 2035
- $2,000,000,000 4.125% Notes due 2045
- $1,250,000,000 4.375% Notes due 2055