Judge sides with Ellison in Oracle shareholder suit over NetSuite acquisition
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2023-05-13 07:20
A Delaware judge has ruled in favor of Oracle founder Larry Ellison in a shareholder lawsuit alleging that he coerced the company into paying a grossly inflated price to acquire software corporation NetSuite

DOVER, Del. (AP) — A Delaware judge has ruled in favor of Oracle founder Larry Ellison in a shareholder lawsuit alleging that he coerced the technology company’s board into paying a grossly inflated price to acquire software company NetSuite Corp. in 2016.

Vice Chancellor Samuel Glasscock III on Friday rejected the plaintiffs’ allegation that Oracle’s acquisition was not entitled to the deference traditionally shown corporate decision-makers under Delaware’s “business judgment” rule.

The shareholders argued that the $9.3 billion deal should be subjected to a more rigorous “entire fairness” review because Ellison was both a controlling shareholder of Oracle at the time and owned almost 40% of shares in NetSuite, which he cofounded in 1998. The lawsuit alleges that Oracle overpaid for NetSuite by $3 billion.

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 the initial presentation to the Oracle board, and the remaining directors set up a special committee to conduct negotiations, the judge noted.

“This is adequate to cleanse Ellison’s conflict as a director and officer standing on both sides of the transaction,” Glasscock wrote.

Glasscock also acknowledged that, while it’s possible for minority stockholders to exercise control of “the corporate machinery” for their own benefit, such a scenario did not apply to Ellison, who is not a majority shareholder of Oracle.

“The evidence demonstrates that he did not control Oracle, and that he absented himself from the acquisition of NetSuite,” the judge wrote. “Moreover, the directors appointed a special committee, and I find that body well-functioning and independent of Ellison.”

Glasscock also rejected the shareholders’ allegations that Ellison and Oracle CEO Safra Catz breached duties of loyalty by misinforming the special committee and concealing material facts regarding the acquisition.

Ellison co-founded NetSuite with Evan Goldberg, a former Oracle employee, in 1998. Both Oracle and NetSuite sell software that allows businesses to automate and manage business processes such as accounting, risk management and supply chain operations.

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