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October 10, 2016updated 13 Jan 2017 12:00pm

Oracle’s $9.3bn NetSuite deal hits troubled waters

Big Red needs 20.4 million shares to be tendered.

By James Nunns

Oracle has had to extend the deadline to complete its acquisition of NetSuite.

The deal to acquire the cloud computing pioneer was agreed in July for $9.3bn, but has had doubts cast over it after NetSuite’s largest institutional shareholder challenged the deal.

In July Oracle made the offer of $109 a share to acquire the company. It needs to acquire 20.4 million shares in order to close the deal, but so far has only received 4.6 million from unaffiliated shareholders that have accepted the offer.

Oracle has had to extend the deadline by a month due to it only receiving around a quarter of the shares necessary from NetSuite’s stockholders.

Oracle said in a statement: “In the event that a majority of NetSuite’s unaffiliated shareholders do not tender sufficient shares to reach the minimum tender condition, Oracle will respect the will of NetSuite’s unaffiliated shareholders and terminate its proposed acquisition.”

One of the big blockers to the deal is the the T. Rowe Price Group, which now owns 14.5 million shares in NetSuite. The group said that it felt that Oracle had undervalued the company and has raised its stake in the company since Oracle made its regulatory filing on the 30th June.

The publicly owned investment firm was founded in 1937.

The publicly owned investment firm was founded in 1937.

This is not the first time that Big Red has had to extend the deal. In September it extended the tender offer till the 6th of October in order to help facilitate the completion of outstanding antitrust reviews; which was received.

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An additional complexity of the deal is that Larry Ellison, Oracle executive chairman, has an “indirect beneficial ownership of approximately 39.5%” of NetSuite’s common stock, according to a September regulatory filing.

This makes Ellison the largest investor in the company and has raised concerns around a conflict of interest.

Oracle sought to address this by appointing a committee of independent directors to oversee its side of the deal, and the two companies agreed that the acquisition must be approved by the majority of NetSuite shares that are not held by Ellison or his family.

The NetSuite board said in a regulatory filing that it recommends that stockholders accept the Oracle offer and tender their shares.

The deal for NetSuite would provide Big Red with a strong customer base below the enterprise level, something which it has struggled with when it comes to mid-market ERP cloud.

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