Oracle Flies Under the Regulatory Radar to Close $27B Cerner Deal
The company, which had announced plans to acquire the electronic health records company last December, closed it overnight
Most readers would be aware that acquisition of electronic health records has raised more regulatory hackles on anti-privacy grounds. Not surprising, given that the market for medical records is said to be worth over $13 billion annually. Which is why companies that acquire businesses in the health vertical get a closer look from the powers that be.
So, when Oracle announced late in December last year that it was buying the Missouri-based Cerner for $28.3 billion – $8.6 billion more than what Microsoft paid for acquiring another health-tech firm Nuance – not too many eyebrows were raised. Because, a healthcare business was becoming mission critical in the portfolio of the enterprise services business.
However, what the Texas-based tech giant did overnight has the potential of raising eyebrows. A curt press statement told us that “…a majority of the outstanding shares of Cerner were validly tendered, and the other conditions to the tender offer have been satisfied or waived. The deal will close on June 8, 2022.”
If that sounded confusing, here’s some more… “American Stock Transfer & Trust Company LLC, the depositary for the tender offer, has indicated that as of 12:00 midnight, Eastern time, at the end of the day on June 6, 2022, approximately 204,280,589 Shares, or 69.2% of the total Shares, have been validly tendered.”
What does this actually mean?
That it was anticlimactic is obvious. What it meant is that Oracle closed the deal overnight by making all the payouts. The contracts were duly signed and the stock transferred. Which means the deal stands closed, leaving very little for the global regulatory bodies to discuss or act upon.
Of course, for all practical purposes Cerner describes itself as a provider for health IT services, devices and hardware. What could have got the regulators to up their antennae is the statement that the company supports “our clients” by surfacing data that enables them to make informed decisions for better management of operations…”
However, with the closure of the deal, Oracle would be hoping that the matter would be considered done and dusted. Of course, there is the HIPAA compliance issue but that’s more from a point of view of individual medical records and given the 40-year history of Cerner, there’s little doubt that the data would be as per the requisite norms.
Putting the deal in proper perspective
For starters, it appears to follow Microsoft’s decision to splurge $20 million for Nuance, an AI-based tech company with interests in the healthcare, fin-tech, telecom and retail verticals. With Oracle now following suit, it appears that both have stolen a march over Google, which was possibly the first to recognize the potential of health records.
In 2021, the acquisitions by Microsoft and Oracle were among the top M&A deals for a combined value of over $50 billion. Other majors were also snooping around the healthcare market for such acquisitions. Amazon shifted a few gears in its healthcare journey last year but Google missed out as David Feinberg, who led its healthcare vertical, joined Cerner in October.
Market analysts claim that the move by Oracle helps the company cement its place into the lucrative healthcare market and embed it into the company’s cloud infrastructure. In terms of US medical records, Cerner stands a close second with a 26% market share behind Epic which holds 28%. In terms of revenues, Cerner has a $5.5 billion run rate while data for Epic isn’t available as it’s a private entity.
The question now is where does that leave Epic? Would one of IBM, Google or Amazon sign a check to get themselves back into contention on the healthcare data market? Else, one wouldn’t be chastised for wondering why IBM spent millions on AI, Watson and Quantum.
