Oracle 2005 Annual Report Download - page 79

Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2006
Acquisition of common stock: Pursuant to the Merger Agreement, each share of Siebel common stock was converted into the right to receive either (a) $10.66 in
cash or (b) a number of shares of Oracle common stock equal to the number of Siebel shares of common stock multiplied by 0.8593, which is $10.66 divided by
the average closing price of Oracle Common Stock on the Nasdaq Stock Market over the ten trading days immediately preceding (but not including) the
Acquisition Date (Average Oracle Stock Price). Since 32.68% of Siebel stockholders elected to receive Oracle common stock, the consideration was prorated, in
accordance with the Merger Agreement, whereby Siebel stockholders electing stock received approximately $156 million in cash and 141 million Oracle shares
of common stock (or approximately $0.8752 in cash and 0.7888 shares of Oracle common stock for each Siebel share). The fair value of stock issued was $12.53,
which represented the average closing price of our common stock for the three trading days up to and including the Acquisition Date.
Fair value of estimated options assumed and restricted stock awards exchanged: As of January 31, 2006, Siebel had approximately 80 million stock options and
restricted stock awards outstanding. In accordance with the Merger Agreement, the conversion value of each option assumed was based on the exercise price of
each Siebel option multiplied by the conversion ratio of 0.8576, which was the closing sale price of a share of Siebel common stock on January 30, 2006 divided
by the Average Oracle Stock Price. The fair value of options assumed and awards exchanged was determined using an average price of $12.53 and calculated
using a Black-Scholes-Merton valuation model with the following assumptions: expected life of 0.25 to 7.23 years, risk-free interest rate of 4.45 – 4.59%,
expected volatility of 24% and no dividend yield. The portion of the estimated intrinsic value of unvested Siebel options and restricted stock awards related to
future service has been allocated to deferred stock-based compensation and is being amortized using the accelerated expense attribution method over the
remaining vesting period.
Acquisition related transaction costs: Acquisition related transaction costs include estimated investment banking fees, legal and accounting fees and other
external costs directly related to the acquisition.
Preliminary Purchase Price Allocation
Under business combination accounting, the total purchase price was allocated to Siebel’s net tangible and identifiable intangible assets based on their estimated
fair values as of January 31, 2006 as set forth below. The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as
goodwill. The preliminary allocation of the purchase price was based upon a preliminary valuation and our estimates and assumptions are subject to change. The
primary areas of the purchase price allocation that are not yet finalized relate to restructuring costs, the valuation of consulting contract obligations assumed,
certain legal matters, income and non-income based taxes and residual goodwill.
(in millions)
Cash and marketable securities $ 2,362
Trade receivables 318
Goodwill 2,514
Intangible assets 1,564
Deferred tax assets, net 318
Other assets 123
Accounts payable and other liabilities (372)
Restructuring (see Note 3) (590)
Deferred revenues (202)
Deferred stock-based compensation 31
In-process research and development 64
Total purchase price $ 6,130
76
Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Research℠