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Why Oracle Is Plowing $1.2 Billion Into This Australian Cloud Company

IT giant Oracle (NYSE: ORCL) will close its 2017 with a new acquisition. The company recently announced that it has signed an agreement to buy Aconex from Australia, a developer of cloud-based software platforms and team collaboration for the construction industry. Oracle will pay 7.80 Australian dollars per share in cash for Aconex, which is 47% higher than the closing price of the company on the trading day before the purchase becomes public.


In total, the agreement is valued at approximately $ 1.2 billion, net of Aconex cash. That's a considerable portion of change, even for a company with a budget the size of Oracle. Although it seems that it would be worth the money.

Cloudy future...

In a press release announcing its purchase, Oracle wrote that "[t] ogether, Oracle and Aconex will provide a comprehensive offer for the administration and delivery of projects that allows customers to plan, build and operate construction projects effectively."

The company did not hesitate to point out that its "Oracle Construction and Engineering Cloud already offers customers the most advanced solutions in the industry for the planning, programming and delivery of large-scale projects."

If some of this is familiar to Oracle observers, it should. In mid-2016, the company made an acquisition of $ 663 million in the construction segment through the purchase of Textura, a developer of contract management and cloud payment solutions for the industry. Oracle combined Texture with its existing construction assets to form Construction and Engineering Cloud.

There is much to be gained by building economies of scale in the segment. In a presentation on the Aconex agreement, Oracle cites several dizzying numbers that promise a bright future. It is estimated that the global construction industry is worth $ 14 trillion, and the volume of construction production will grow by 85% between 2015 and 2030.

Oracle, of course, is not the only company that sees an opportunity here. There are many companies that offer cloud-based construction management solutions. The list of such suppliers is long and full of ambitious start-up companies and the veteran IT player.

Aconex, by the way, is one of the favorites in the industry. It often reaches the "best of the lists" in the sites that classify the construction management software. Given that there are hundreds of solutions in the market, that is saying something.

Aconex's revenues have had a strong upward trend, rising sharply from A $ 66 million ($ 51 million) in fiscal year 2014 to A $ 161 million ($ 123 million) in 2017. It has been profitable, although not to a large extent , in recent years .

Therefore, Aconex seems a valuable asset for Oracle's expanding construction portfolio. Is it worth $ 1.2 billion? Yes, assuming that the new owner can integrate it more or less uniformly within the construction and engineering cloud. And, of course, build some economies of scale that will help you get more share in the occupied building cloud solutions segment.
The details

The Oracle / Arconex agreement is subject to regulatory approval by the relevant authorities, and Oracle anticipates that it will be closed sometime in the first half of 2018.

The US company did not specify how the purchase would be financed. In late November, Oracle, notably cash-rich, had just over $ 21.3 billion in cash in its books.

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