Judge sides with Ellison in Oracle’s shareholder suit over the acquisition of NetSuite
DOVER, Del. (AP) — A Delaware judge has ruled in favor of Oracle founder Larry Ellison in a shareholder lawsuit alleging he forced the tech company’s board of directors to pay a huge price to buy software company NetSuite Corp. to take over in 2016.
Vice Chancellor Samuel Glasscock III on Friday rejected prosecutors’ contention that the Oracle acquisition was not entitled to the deference traditionally shown to business decision makers under Delaware’s “business review” rule.
Shareholders argued that the $9.3 billion deal should be subject to a more rigorous “full fairness” review because Ellison was both a controlling shareholder of Oracle at the time and owned nearly 40% of the stock in NetSuite, which he co-founded in 1998. claims Oracle overpaid $3 billion for NetSuite.
While noting that Ellison was “a force” at Oracle and a face of the company, Glasscock said Ellison was not a controlling shareholder and did not try to influence the board’s decision to acquire NetSuite. Ellison withdrew from Oracle’s consideration of the NetSuite acquisition just before its initial presentation to Oracle’s board, and the remaining directors set up a special committee to conduct negotiations, the judge noted.
“This is sufficient to resolve the conflict between Ellison as director and officer on both sides of the transaction,” Glasscock wrote.
Glasscock also acknowledged that while it is possible for minority shareholders to exert control over “the company machinery” for their own benefit, such a scenario did not apply to Ellison, who is not a majority shareholder in Oracle.
“The evidence shows that he had no control over Oracle and that he was absent from the NetSuite acquisition,” the judge wrote. “In addition, the directors have appointed a special committee, and I find that body well-functioning and independent of Ellison.”
Glasscock also rejected shareholder allegations that Ellison and Oracle CEO Safra Catz breached their duty of loyalty by misinforming the special committee and concealing material facts about the acquisition.
Ellison co-founded NetSuite with Evan Goldberg, a former Oracle employee, in 1998. Both Oracle and NetSuite sell software that helps companies automate and manage business processes such as accounting, risk management, and supply chain operations.