Oracle Warns NetSuite Deal End

October 8
6:00 AM 2016

Oracle has threatened to pull out $8.8bn bid for cloud software with company NetSuite due to lacking support for the latter to pursue. Friday's warning wiped 3 per cent from NetSuite's shares in morning trading and has left mutual fund group T Rowe Price facing a predicament, ending its opposition and accept the $109 -a-share offer, or continue to hold out for more money and risk losing a deal that represents a 25% premium to the previous price, writes Richard Waters in San Francisco.

Being the NetSuite's biggest shareholder after Larry Ellison, the Oracle chairman who also provided early personal financial backing to the cloud company, T Rowe Price's position will play a big part in the outcome. It owns 18% of NetSuite's shares, though the impact of its stake will be magnified since Mr Ellison and other insider shareholders together representing 50% of the stock have said they will not vote.

Oracle extended its offer until what it said would be a final deadline on November 4. Oracle furthered that if the plan does not acquire enough support by then, the database software company would "respect the will of NetSuite's unaffiliated shareholders and terminate its proposed acquisition."

NetSuite's shares had been trading slightly above Oracle's offer as Wall Street anticipated that the company would sweeten its bid, but fell back to $106.03 after Friday's warning. As of Friday, Oracle said that holders of only 11.2 per cent of the unaffiliated shares had accepted the offer.

Brought about by Mr Ellison's large stake, Oracle has long been seen as the most likely acquirer of the cloud company. The bid raised concerns about whether his influence would lead to Oracle over-paying for the acquisition, though the company said a special committee of its directors had evaluated and negotiated the transaction, and had also unanimously approved it on behalf of the board.

 "In our view, the inherent conflicts of interest between NetSuite, the Ellison entities and Oracle are daunting and may be impossible to manage." said Oracle.

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