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By | Gavin Clarke 8th September 2016 15:12

Investors resist Larry Ellison's $9.3bn NetSuite deal

'Unique' relationship with big shareholder questioned

Influential investors are opposing NetSuite’s $9.3bn acquisition by Oracle for selling their firm short.

The cloud pioneer’s single largest unaffiliated shareholder, T Rowe Price Associates, has written to NetSuite’s board in a letter here explaining why it won’t hand over its stock for the deal.

It raises a major question over whether the deal, announced in July and scheduled to close this year, can now actually proceed.

NetSuite’s board has stood behind the deal, recommending shareholders accept Oracle’s proposal.

But T Rowe Price Associates is resisting the deal, claiming a conflict of interest exists, insisting NetSuite's board had failed to consider alternative options, and stating its belief that other potential suitors would have been deterred in making a bid because of NetSuite's "unique" relationship with Larry Ellison - Ellison is the largest single investor in NetSuite with a 40 per cent holding.

The believes NetSuite’s board gave up while the firm had lots of growth opportunity ahead as a provider of cloud ERP.

The letter, dated September 6, has been published by NetSuite as part of a regulatory filing. NetSuite’s response is here. A NetSuite spokesperson would not elaborate further.

In the letter, T Rowe Price says NetSuite is being sold without adequate consideration having been given for other options or potential bidders.

The investor concludes, however, that NetSuite’s “unique relationship” with Ellison would have caused problems in seeking other possible buyers. It said it would prefer that NetSuite remain independent.

The letter continues:

“In our view, the inherent conflicts of interest between NetSuite, the Ellison entities and Oracle are daunting and may be impossible to manage… the board has set an important precedent with this transaction, and we would have serious governance concerns about any deal between these parties that does not include this crucial safeguard of unaffiliated shareholders’ interests.”

In the letter, T Rowe Price spoke of its “concern” that Oracle’s price of $109 per share for NetSuite was anchored early on, following what it claims it was told were “loose, pre-due-diligence, exploratory conversation where a price range of $100-$125”.

It added: “We were disappointed to see in the tender offer document that NetSuite did not undertake an outbound market check with inquiries to other logical purchasers before agreeing to Oracle’s offer.”

Oracle was unavailable to comment at the time of writing. ®

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