Larry Ellison cleared of forcing Oracle to overpay for NetSuite
Billionaire and his financial stake in the deal aren't to blame, says a Delaware judge
Oracle may have overpaid for software company NetSuite, but it wasn't founder Larry Ellison's fault, a Delaware court has decided after a nearly six-year legal fight brought by upset shareholders.
Instead of pressuring leaders at Oracle – which Ellison founded, today works at as CTO, and owns slightly more than a quarter of voting shares in – Delaware's Vice Chancellor Samuel Glasscock III said that Ellison did everything by the book in recusing himself from the acquisition of NetSuite, which he provided seed money for and owns a 40 percent stake in.
The original allegations claimed Ellison pressured Oracle to buy NetSuite for $9.3 billion - a full $3 billion more than the company was worth, it's claimed - enriching himself by some $4.1 billion in the process. The suit also claimed that NetSuite's business was hampered by Oracle's rollout of Fusion, which directly competed with a NetSuite product, and NS stood to lose money if not acquired by Oracle.
Despite recusing himself from the deal shortly before it was presented to the board, and the board's decision to empower a special committee to negotiate the acquisition, the plaintiffs argued that Ellison's influence at Oracle is outsized and he must be viewed as a controller regardless of his non-controlling share.
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Glasscock admitted in his decision that minority shareholders can be deemed controllers "if they have control of the corporate machinery … even without the ability to oust the directors." Furthermore, Glasscock said, "Ellison is a force at Oracle, no doubt; he is the main creative party and a face of the company."
Despite his apparent ability to influence the decision, Glasscock said Ellison didn't do so, and even took steps to ensure no influence was wielded. Deciding in favor of the plaintiffs in that case, he said, simply wouldn't be fair.
"The concept that an individual — without voting control of an entity, who does not generally control the entity, and who absents himself from a conflicted transaction — is subject to entire fairness review as a fiduciary solely because he is a respected figure with a potential to assert influence over the directors, is not Delaware law, as I understand it," Glasscock said.
The original court filing also argued that Ellison, co-defendant Oracle co-CEO Safra Catz, and directors who served on the negotiating committee all had conflicts of interest since they had worked closely with Ellison and would be removed from their positions if the deal hadn't gone through. Catz was found by the courts to have done nothing wrong, either, by the way.
"Today's decision constitutes a complete vindication of Mr Ellison and Ms Catz, each of whom has been subject to these baseless claims for seven years," said an attorney for the pair. ®