While no deal has been officially announced, CERN stock is jumping higher today on multiple media reports that Oracle is circling the Kansas City, Missouri-based electronic medical records company. The acquisition could be worth up to $30 billion, and a formal deal could be announced as soon as today.
If the rumors turn out to be true, Cerner would be the biggest acquisition ever for Oracle. It would also rank as one of the biggest deals on Wall Street this year.
What Happened With CERN Stock
Cerner, which has been in business since 1979, is today the second-largest seller of electronic health record software in the U.S. In 2019, it named Amazon (NASDAQ:AMZN) as its preferred cloud provider and said the two companies were collaborating on artificial intelligence services for healthcare companies. Acquiring Cerner would give Oracle lucrative health data that it could use to improve its artificial intelligence-based cloud services, boosting its role in the healthcare space.
Cerner has been undergoing a transition since 2019, which has accelerated during the pandemic. In the past two years, the company has laid off employees, sold parts of its healthcare information technology business in Germany and Spain, and announced several senior executive changes, hiring a new CTO, CMO and chief strategy officer (CSO).
On Oct. 1, 2o21, David Feinberg, who previously was head of Google Health, became president and CEO of Cerner.
Why It Matters
A $30 billion deal to buy Cerner would be a blockbuster in the technology space. Also, the acquisition of Cerner would help to expand Oracle into the healthcare sector where it has traditionally not had a big presence. Cerner would also bring Oracle advanced AI technology and and further strengthen its cloud computing business.
Oracle continues to be a leading software company and major tech player. On Dec. 9, the company reported fiscal second-quarter earnings that topped estimates. It announced earnings of $1.21 per share, which beat estimates by 10 cents. The company also posted $10.36 billion in revenue, which exceeded estimates of $10.21 billion.
ORCL stock has been a top performer in 2021, having risen 51% year to date. CERN stock has not fared as well, rising only 2% on the year to close trading yesterday at $79.49 a share.
If the rumors of an acquisition prove to be true, it could help to send both companies’ share prices higher as we close out the year, especially Cerner, whose shareholders are expected to be paid a premium to tender their stock.
What’s Next for Cerner
Confirmation of a deal is paramount here. Oracle and Cerner need to announce publicly whether they are entering into an acquisition or not. Investors need to remember that a deal is not a certainty despite media reports and rumors. Earlier this autumn, rumors that digital payment giant PayPal (NASDAQ:PYPL) was acquiring social media company Pinterest (NYSE:PINS) sent shares of those companies sharply higher before it was announced that no such deal was in the works. News that there was no deal caused PINS stock to fall sharply, wiping out all the gains it achieved based on the rumors.
For now, investors should wait for confirmation that Oracle is indeed buying Cerner.
On the date of publication, Joel Baglole held a long position in GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.