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NetSuite purchase continues to give Larry Ellison headaches

Larry Ellison, president of Oracle Corp, has testified in a lawsuit against him for failing to take over the company he co-founded and in which it has a 40% stake. It was last Wednesday, when Ellison spoke before the courts of Delaware, in the USA, for a lawsuit made by the investors themselves. It accuses the eighth-richest person in the US, along with other Oracle members, of paying a disproportionate and out-of-market figure for NetSuite in 2016, when the company agreed to spend $3 billion to take over the company.

It was a year later when the Saint Louis Firefighters Pension Fund, one of Oracle’s major investors, sued its president and the company’s board of directors to challenge the purchase and recover money that, through a derived demand, should return to the organization.

If the shareholders who sued the company are successful in this lawsuit, Oracle would likely be forced to make major changes to its board of directors. The paradox would instead be that Ellison himself, as Oracle’s wholesale shareholder, would also benefit if the value of the organization increases.

The lawsuit holds Ellison directly responsible for making decisions that would go against Oracle’s interests, despite the fact that since 2014 he was no longer its CEO. However, the prosecution has provided evidence that would show (including audio files) that Ellison was still a major “shadow power” capable of making executive decisions.

Winds in favor of Ellison

The lawsuit filed accuses Ellison in the company of the current director, Renee James, of promoting a purchase at a time when NetSuite sales they were in a tailspin for, precisely the emerging competition of Oracle. In turn, he claims that many of Oracle’s directors lied about Ellison’s role in the purchase of NetSuite. In this, an agreement of 109 dollars per share was reached, which was equivalent to a premium of more than 42% over the original price of the shares.

The defense for Ellison and the other defendants argues, however, that the company set up a special board committee to evaluate the NetSuite deal. In total, they met up to 15 times to discuss the purchase, although Ellison did not attend any of them.

The defense also downplayed the accusations. about Ellison using Safra Catz (Oracle CEO at the time) and Renee James to design the deal in a way that would benefit Ellison himself. “It would not make sense for Ellison to risk his investment in Oracle, and his reputation, by getting Oracle involved in a declining and contentious transaction, just to save a much smaller investment in NetSuite.”

To make their case under Delaware law, the plaintiff must show the judge that Oracle’s purchase of NetSuite “was not entirely fair.” And that Ellison, Catz and James violated shareholder law by overpaying for the software maker.

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