- An unprecedented lawsuit is still pending in which a shareholder has been authorized by the Oracle Board of Directors to sue Oracle's board members, including Larry Ellison.
- A new version of the complaint filed this week contains additional information based on internal documents and emails.
- The lawsuit alleges that Oracle overpaid NetSuite when Oracle paid $ 9.3 billion in cash in 2016. Since Ellison was the founder and largest shareholder of NetSuite, he was paid around $ 4.1 billion in cash.
- The lawsuit alleges that Oracle overpaid $ 1.6 billion, which means that if Ellison wins, Ellison believes Ellison should return to Oracle.
- Oracle says the case has no value and intends to fight it, although Oracle would actually be the main beneficiary if the shareholder wins.
- You can find more stories on the Business Insider homepage.
As we previously reported, Oracle's board of directors is in the midst of an unprecedented shareholder lawsuit over the company's $ 9.3 billion cash business to buy NetSuite in 2016.
An updated, amended version of the lawsuit was filed with the Delaware Chancellor's Court earlier this week, with new details on the origins of the business and the resulting boardroom drama. And the filing suggests that CEO Larry Ellison should be personally on the hook for the $ 1.6 billion claimant’s shareholder claims Oracle overpaid the deal.
The new complaint contains emails from an in-house investigation that shareholders believe may be helpful in defending their case. Among the emails: comments from Oracle executives on NetSuite's "crushing" and a strange internal discussion at Oracle that the deal does not raise antitrust issues as Oracle CEO Larry Ellison controlled both companies.
Oracle has consistently stated that the lawsuit is unfounded, and a company spokesperson confirmed the position to Business Insider and promised to "vigorously defend the allegations."
The strange thing about this lawsuit is that Oracle's board members are technically sued as a so-called derivative lawsuit on behalf of the company.
Even the judge, Vice Chancellor Glass Cock, is amazed by the situation and writes poetically into it December, "There are a number of rare aves and chimeras in the cryptozoological section of the Equity Menagerie … An unusual resident can be seen here."
And if the recent legal filing is a clue, the weird legal saga could bring further surprises.
"I love crushing NetSuite"
The complaint alleges that Oracle overpaid billions of dollars in the acquisition of NetSuite, a company in which Oracle CEO Ellison happened to be the largest shareholder. The lawsuit alleges that the price has been tacitly agreed by Ellison-loyal board members to preserve his investment at a time when NetSuit's assets appeared to be waning.
According to the shareholder Firemen & # 39; s Retirement System in St. Louis, the premium purchase price for NetSuite was particularly strange since Oracle had competed aggressively and successfully with NetSuite before the deal. "I love crushing NetSuite!" wrote Jeff Henley, Oracle's Executive Vice Chairman, in May 2015.
Despite the eagerness to destroy NetSuite, a later internal email reveals an Oracle manager who claims that the takeover does not harm the competition due to the Larry Ellison joint connection.
"The point is that the competitive effect of the merger will be minimal since Larry has a controlling stake in both, so the merger will not change anything," the managing director wrote.
Oracle has argued that Ellison pulled out of the negotiations and the price it paid for NetSuite was fair. In fact, T. Rowe Price, one of NetSuite's largest shareholders, fought the deal for months, claiming that Oracle's offer was too low.
Nevertheless, Ellison was the founder and main shareholder of NetSuite. Of the $ 9.3 billion Oracle paid, about $ 4.1 billion went into his pocket.
A thing of $ 1.6 billion
Firemen lawyers expect Oracle to pay an additional $ 1.6 billion because Oracle executives reportedly didn't work on buying NetSuite for less.
The implication is how much money Ellison personally should have on the hook to return to Oracle's tills should firefighters win the case.
Such a result would be reminiscent of a previous case in which Ellison was involved. As early as 2011, Oracle approved the purchase of another company that was majority-owned by Ellison and called Pillar Data Systems. Oracle agreed not to pay cash, but to make payments based on Pillar's performance after it was part of Oracle. Ellison was supposed to receive the first payment of $ 562 million. The shareholders sued and Ellison agreed to waive this payment. In 2019 Oracle has closed Pillar.
This deal differs in that NetSuite was a cash deal, so shareholders, including Ellison, were paid when the NetSuite deal closed in November 2016.
Ellison isn't the only one attacked in this suit. The shareholder is loosely suing for "billions" and is also targeting the other Oracle board members involved in the deal, as well as Zach Nelson, CEO of NetSuite, and Evan Goldberg, founder. At some point the shareholder sued the entire board, but he carved his accused in this last incarnation. It should be noted that Oracle insures and compensates its board members. Should the shareholder win, the Oracle insurance company may actually be the one making the payment.
Given that Oracle says there is a fight and that the settlement talks have failed, Oracle may not agree. In this case, the next step is an attempt.
You can read the latest submission here:
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