Oracle Wins Shares Needed to Clinch $9 Billion NetSuite Buy

By Brian Womack for Bloomberg.

NetSuite Inc. shareholders endorsed Oracle Corp.’s bid for the software provider, clearing the path for the $9 billion acquisition after weeks of conflict between a large investor and executives over the price tag.

The deal received approval from 53 percent, or 21.78 million shares, of NetSuite stockholders that were eligible to endorse the bid, Oracle said Saturday in a statement. The approval comes after T. Rowe Price, which recently held about 18 percent of the stock, publicly pushed back against the offer of $109 per share, saying $133 would be a fairer price. An Oracle executive had said the offer was final. The decision came from shareholders other than Oracle Chairman Larry Ellison and related parties who hold about 45 percent of NetSuite, along with executive officers and directors.

Oracle is counting on NetSuite to help the company’s shift to cloud-based services and better compete with rivals such as Salesforce.com Inc. and Microsoft Corp. NetSuite is one of the largest pure providers of these modern software features, having carved out a leadership position in the market for tools that manage customers’ core financials.

The deal is set to be completed on Monday, Oracle said. The tendered shares do not include more than 1 million separate shares tendered pursuant to the guaranteed delivery procedures set forth in the offer to purchase, the company said.

Crucial Timing

NetSuite had come under pressure amid the uncertainty with the acquisition, Jack Andrews, an analyst at D.A. Davidson, said in a note late last month. Indeed, sales rose 26 percent in the third quarter, falling short of estimates. It also was a slowdown from recent quarters when revenue expanded more than 30 percent.

For Oracle, the deal came at a crucial time. The shift to the cloud is a key part of its growth plan, as more customers demand software delivered over networks instead of installing programs on their own servers. While cloud revenue in the fiscal first quarter rose 59 percent, the company’s total sales declined 1.7 percent, falling short of estimates.

The agreement, first unveiled in July, was expected to be accretive to earnings. It wasn’t a typical acquisition process, given Ellison’s holdings in NetSuite. He was an early investor in the company.

Following the July announcement of a deal, the stock traded around the offer price of $109 for several weeks. That continued even after investors learned T. Rowe wasn’t happy with the price in early September. Later that month, Safra Catz, Oracle’s co-chief executive officer, said the $109 offer was the right price.

Stock Dive

The stock dived on Oct. 7 by the most since June after Oracle said the deal had only received about 22 percent of the needed vote from unaffiliated shares, and the company extended its tender offer to Friday.

Investors grew more nervous in the following days, and in late October, Mark Hurd, Oracle co-chief executive officer, said it was the “best and final” offer. He also said the company was willing to walk away and move on to other things. Within a couple of days, T. Rowe sent Oracle’s board a letter saying it still didn’t plan to tender shares and wanted the higher price.

“Part of the reason we decided to send a letter yesterday was to let not only Oracle, but also the marketplace, know that ‘Look, we believe there is a price that makes sense, it’s just higher than $109,’” Robert Sharps, vice president at T. Rowe, said in an interview then.

The price of NetSuite stock fell to less than $90 earlier earlier this week, before rebounding to close at $90.34 on Friday. The deal probability was 38 percent at Friday’s close, according to estimates by Bloomberg.