Kansas City’s Cerner Corp. rebuffed another takeover effort before merger with Oracle
.JPG "Cerner, the healthcare IT company, has agreed to be purchased for $28.3 billion by software giant Oracle. Cerner Corporation’s World Headquarters Campus is located at 2800 Rock Creek Parkway in North Kansas City.")
Months before anyone at Cerner Corp. ever heard from Oracle about a possible acquisition, the Kansas City healthcare IT firm rebuffed a separate takeover attempt.
In July of last year, Cerner leaders were approached by a private equity firm interested in exploring an acquisition. At that time, the chairman of Cerner’s board and management told that firm they were focused on hiring the company’s next chief executive and “pursuing a standalone strategy,” according to a new SEC filing.
The 171-page filing outlines terms of the potential merger with Oracle, which was announced in December, and reveals new details about how the deal came together. The $28.3 billion merger is expected to close this year, pending shareholder and regulatory approval.
It’s unclear which private equity firm was interested. Cerner officials did not respond to questions about the matter.
Over the summer, Cerner was in the middle of a national search for its next CEO. Cerner’s board in May 2021 announced that then-CEO Brent Shafer would be leaving the company.
Later in the summer, the private equity group tried again.
On August 9, Cerner leaders discussed quarterly performance results with the undisclosed private equity firm, which again expressed an interest in purchasing the company. No exact terms of a deal were discussed, according to the SEC filing, and Cerner reiterated plans to continue operating alone.
Ten days later, Cerner announced the hiring of David Feinberg, a medical doctor and Google executive, as the company’s next chief executive. Feinberg took the helm on October 1, instituting an employee vaccine mandate on his first day on the job.
Oracle entered the scene the next week.
The Austin-based software giant contacted Cerner leaders on Oct. 7 to arrange a call to discuss “potential tactical or strategic collaboration between the companies,” according to the SEC filing.
The next day, Oracle leaders told counterparts at Cerner of their interest in a possible acquisition.
The private equity firm reentered the picture, asking Cerner leaders in October whether they had interest in participating in a “then-competitive process” to acquire another healthcare firm. Cerner’s management declined, according to the filing.
Cerner and Oracle held several meetings over video conference in early October, when Cerner brought in lawyers from Latham and Watkins to advise.
Discussions were serious enough that the two firms entered into a disclosure agreement on October 15. That led to a series of meetings in which the two companies discussed Cerner’s business model, technology and financials.
Then Oracle submitted an official acquisition offer on November 12, offering to pay $92 per Cerner share. That represented a premium of 23.3% premium compared to Cerner’s closing share price of $74.63 the day before and a 10.4% premium to Cerner’s 52-week high trading price.
Cerner’s board discussed the initial offer in detail on November 17 and approved hiring financial advisers at Goldman Sachs and Centerview to provide guidance on the potential deal. The board discussed terms of Oracle’s offer, Cerner’s prospects at continuing as a standalone company and the possibility of contacting other interested potential buyers, including the private equity firm.
“After discussing the opportunities and risks of engaging with potential private equity buyers through an outreach process, the Cerner Board determined that pursuing a potential sale to a private equity buyer did not compare favorably to pursuing the transaction with Oracle, particularly in light of the speed at which Oracle indicated it would be prepared to proceed with the proposed transaction,” Cerner said in its SEC filing.
The board decided that ongoing talks with Oracle were the best way to move forward and created a special group made of board members to study the potential transaction. On the day before Thanksgiving, a Cerner executive told Oracle it would not accept the deal at the current price.
The board indicated it wanted to see a per-share purchase price in the upper $90s.
Oracle countered on December 1, offering $95 per share. An Oracle official called a Cerner leader indicating that was the company’s “best and final offer.”
While board members still had questions, they agreed to move forward with the second offer from Oracle. That led to a series of meetings and presentations involving employees of both companies. Both sides were negotiating terms of a merger agreement when news of the deal broke in the Wall Street Journal on December 16.
The next day, another company contacted Cerner expressing interest in “exploring strategic options with Cerner.” The board discussed the inquiry, which was light on details, and informed Oracle.
In the early hours of the morning on December 20, the board held another meeting to debate the Oracle offer. The board ultimately approved the agreement, which was signed before the stock market opened that morning. Both Oracle and Cerner announced the news with press releases shortly thereafter.
This story was originally published January 24, 2022 at 5:00 AM.
