Oracle closes $28B deal to buy EHR giant Cerner

Updated: June 7 at 2 p.m. ET

Software maker Oracle has closed its deal to acquire health IT company Cerner, effective Wednesday.

Austin-based Oracle finalized a stock tender offer on Monday with 69.2% of all Cerner shares being tendered to the acquiring company.

The all-cash deal values Cerner at $95 a share. The transaction, announced in December, is Oracle's largest acquisition ever and one of the largest takeovers this year. 

The database giant cleared the final regulatory hurdle for its pending $28.3 billion acquisition of Cerner a week ago.  Oracle said it obtained the required antitrust approvals for the deal, including European Commission clearance. 

Oracle said Cerner will be the company's "anchor asset" to expand into healthcare and it's expected that the acquisition should help Oracle scale up its cloud business in the hospital and health system market. Healthcare is a $3.8 trillion market in the U.S. alone, and the company plans to expand Cerner's business into more international markets.

"We expect Cerner to be a huge growth engine for years to come," said Safra Catz, Oracle's CEO, in a statement last week. 

“Working together, Cerner and Oracle have the capability to transform healthcare delivery by providing medical professionals with a new generation of healthcare information systems,” said Larry Ellison, chairman and chief technology officer at Oracle. “Better information enables better treatment decisions resulting in better patient outcomes. Our new, easy-to-use systems are designed to lower the administrative workload burdening our medical professionals while improving patient privacy and lowering overall healthcare costs.”

The acquisition will be immediately accretive to Oracle's earnings on a non-GAAP basis in fiscal year 2023, according to Catz.

Big tech making waves in healthcare IT

"This [deal] is proof that health IT is a very changed industry from what it has long been. It was traditionally the showcase domain for EHR vendors, up until the likes of Microsoft, Amazon, Google and Oracle made their moves. The industry will never be the same," said Mutaz Shegewi, research director, provider IT transformation strategies at strategic consulting firm IDC Health Insights.

Ten years ago, the tech giants made some early, unsuccessful plays into healthcare, such as Microsoft's attempt at personal health records with HealthVault. But the past few years have seen big software and tech giants make a concerted push into healthcare with megadeals like Microsoft's $19.7 billion bid for Nuance and two private equity firms picking up Cerner competitor Athenahealth in a $17 billion deal.

There is a platform war playing out, and big tech players are making significant investments, Shegewi said. "You go and acquire the second-largest EHR company in the U.S. and the largest EHR vendor globally, that's a significant statement and a play to be relevant in healthcare." 

Oracle’s acquisition of Cerner may be a play to get a strong foothold in the emerging cloud opportunity in healthcare, noted Paddy Padmanabhan, founder and CEO of Damo Consulting, a growth strategy and digital transformation advisory firm.

"Cerner is a leading EHR vendor and healthcare is in the early stages of the cloud journey," Padmanabhan told Fierce Healthcare back in December when the deal was announced.

Oracle has been slow to tap into the cloud opportunity landscape relative to other big tech firms, he said. "The Cerner acquisition may provide the boost it needs to become a strong contender in an emerging space with significant headroom for growth," he said.

Oracle is known for its massive database technology, and acquiring Cerner expands the company's reach to major health systems and presents potentially lucrative cross-selling opportunities, Brad Haller, a partner in the M&A practice at consulting firm West Monroe, told Fierce Healthcare back in December.

"If Oracle wants to be a player in this space, and obviously they do for $30 billion, they need access to patient data and can't rely on third parties and just continue to be the processor," Haller said.

For Cerner, a 43-year-old company, Oracle's tech muscle will help boost its services and capabilities for providers.

“Joining Oracle as a dedicated industry business unit provides an unprecedented opportunity to accelerate our work modernizing electronic health records, improving the caregiver experience, and enabling more connected, high-quality and efficient patient care," said David Feinberg, Cerner's CEO and president, in a statement.

Cerner and Oracle executives specifically highlighted the potential to leverage voice and natural language processing technology with Cerner's software.

Cerner’s largest business and most important clinical system already runs on the Oracle database, noted Mike Sicilia, executive vice president, industries at Oracle.

"No change required there. What will change is the user interface. We will make Cerner’s systems much easier to learn and use by making hands-free voice technology the primary interface to Cerner’s clinical systems," Sicilia said in a statement.