Taleo stock downgraded on Oracle $1.9B purchase

February 10, 2012

Analysts downgraded Taleo Corp.’s stock Friday because they believe that Oracle Corp.’s plan to buy the software company for $1.9 billion will likely go through at that price.

They said they believe the acquisition is a good fit. A higher bid from another company is unlikely, they said, suggesting that the stock probably won’t rise much above the proposed purchase price of $46 per share.

Taleo makes software that helps businesses hire and manage their employees. The planned purchase extends Oracle’s offerings in the growing arena of cloud-based computing. With the cloud, businesses access software and services over the Internet rather than running them in-house. The software is housed in outside locations operated by companies such as Oracle.

Oracle announced its plan to buy Taleo on Thursday for $46 per share, which was 18 percent above Wednesday’s closing price of $38.94. Taleo’s stock rose 17 percent on Thursday to close at $45.64, and added 7 more cents to $45.71 in midday trading Friday.

Morgan Keegan analyst Michael B. Nemeroff downgraded Taleo’s stock to Market Perform from Outperform, saying that Oracle is paying a fair price for Taleo, so a higher bid for the company is not likely.

Rick Sherlund at Nomura Securities downgraded it to Neutral from Buy and raised the price target to what Oracle is offering, $46. It had been $44. Sherlund said there shouldn’t be any problems closing the deal, which is subject to approval from regulators and Taleo shareholders.

Mark Marcon at Robert W. Baird & Co. lowered his rating on Taleo to Neutral from Outperform for similar reasons. He said that acquisition made “perfect strategic sense’’ for Oracle because of rising demand from clients for cloud-based human-resources software.

He doesn’t expect a higher offer for Taleo because the most likely rival bidder, SAP AG, already has plans to buy another human-resources software company, SuccessFactors, for $3.4 billion.