Oracle says it'll walk from NetSuite deal if shareholders balk

T. Rowe Price is one institutional shareholder that wants a higher price for NetSuite. Oracle is extending its tender offer for NetSuite until November 4, or it'll walk.
Written by Larry Dignan, Contributor

Oracle said that is extending the expiration of its tender offer for NetSuite to November 4 and if it doesn't get enough votes it will terminate the deal.

The company, which offered to buy NetSuite in a deal valued at $9.3 billion, said the November 4 date represents its final extension. "In the event that a majority of NetSuite's unaffiliated shareholders do not tender sufficient shares to reach the minimum tender condition, Oracle will respect the will of NetSuite's unaffiliated shareholders and terminate its proposed acquisition," said Oracle in a statement.

Oracle offered $109 a share for NetSuite, but some shareholders have held back votes for a higher offer. Oracle needs 20,403,928 out of 40,807,854 total unaffiliated shares to vote yes for the deal.

As of October 6, Oracle had 11.2 percent of total unaffiliated shares and 55.3 percent of shares outstanding in their corner for the NetSuite purchase.

T. Rowe Price is NetSuite's largest institutional shareholder and is apparently holding the deal back. Oracle appears to be calling the mutual fund giant's bluff. Oracle has already received antitrust approval.

In a letter to Oracle September 7, T. Rowe Price said the acquisition of NetSuite failed to look at synergies that would make the case for a higher price:

Our interpretation of the tender offer filing and comments made by NetSuite in our recent meeting is that no analysis was conducted during the negotiation process on the value of potential synergies the acquirer would realize in this merger. The decision not to explore this synergy figure surprises us. Given the uniqueness of fit between NetSuite's business and Oracle's needs, and given the lack of substitutes that Oracle might acquire because the alternative targets have insurmountable takeover defenses such as dual-class stock, it is clear to us that a combination of Oracle and NetSuite would likely create additional, incremental value over both short and long time horizons. In our view, it is reasonable and appropriate for NetSuite's investors to expect to share in some of the synergies that will accrue to the buyer.

Oracle CTO Larry Ellison owns about 40 percent of NetSuite.

Should the deal fall through some interesting cloud questions arise. Consider the following:

  • NetSuite would bolster Oracle's cloud efforts, but if the deal falls through the company's menu of cloud services is shorter.
  • If Oracle can't buy NetSuite with Ellison as the largest investor who would?
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