Business software maker Oracle said on Thursday it would buy NetSuite for about $9.3 billion in cash, a deal designed to help Oracle gain market share in the fast-growing cloud computing business.
NetSuite shares rose about 18 percent to $108.05 in morning trading, just shy of the offer price of $109 in cash per share.
Oracle shares were up slightly to $41.01.
"It's definitely pricey from Oracle's perspective, but it's understandable and it's justifiable especially in this environment, when we've seen software-as-a-service companies go as high as 10, 11, 12 times sales," said Morningstar analyst Rodney Nelson.
Oracle and NetSuite both offer software applications that help companies automate back end and administrative operations from technology to human resources.
Oracle's cloud business, which stores enterprise software and data on remote servers, lets the company sell to clients who lack the budget for on-site hardware and technology staff.
Like its rivals such as SAP , Amazon.com and Microsoft, Oracle has focused on moving its business toward the cloud-computing model as sales of traditional software licenses struggle.
The deal could also help Oracle, which is aggressively trying to build and sell more cloud-based business software, play catch up with competitors such as Workday and Salesforce.com that specialize in cloud-based offerings.
Jefferies analysts said in a note the deal provides an immediate, significant entry into the mid-market for corporate applications, but also said "the price paid seems steep."
Oracle has also acquired companies such as Textura and Opower to increase its competitiveness in the cloud market.
The company expects the deal to add to its adjusted earnings in the first full fiscal year after it closes.
NetSuite on Thursday reported strong second second-quarter results, with revenue up 30 percent to $230.8 million and adjusted net income that beat estimates.
Oracle Executive Chairman Larry Ellison and his family owned around 40 percent of NetSuite's shares, according to a regulatory filing from NetSuite. Oracle said the deal was led by a committee of independent directors.
NetSuite, founded in 1998, pioneered cloud computing by creating the first company dedicated to providing business applications over the internet, Oracle said. NetSuite's chief executive, Zach Nelson, was responsible for Oracle's global marketing from 1996 to 1998.
In June, Oracle said that revenue from its cloud-computing software and platform service accounted for 8 percent of overall revenue.
