T. Rowe Price Group Inc. notified NetSuite Inc. that it will oppose Oracle Corp.’s$9.3 billion acquisition of the cloud-software provider, citing conflicts of interest in the deal among its concerns.
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Oracle Executive Chairman Larry Ellison beneficially owns about 40 percent of NetSuite’s shares as of February, according to a regulatory filing.
T. Rowe Price, NetSuite’s second-largest-shareholder, said on Wednesday it owns about 14.5 million shares, or 18 percent, of the company. The offer is conditioned on both the receipt of a majority of shares outstanding and a majority of those not held by Ellison or NetSuite insiders and employees.
T. Rowe Price, one of the world’s largest mutual funds, has a more than 12.9% stake in Netsuite. Its shares were trading at $109.30 on Wednesday afternoon, slightly above the agreed price, indicating some investors expected a new deal.
In the letter, T Rowe Price spoke of its “concern” that Oracle’s price of $109 per share for NetSuite was anchored early on, following what it claims it was told were “loose, pre-due-diligence, exploratory conversation where a price range of $100-$125”.
T. Rowe, however, said it appreciated some conditions NetSuite put into place, such as the minimum acceptance threshold in the tender offer.
T. Rowe has been the occasional exception to this convention.
“There are numerous reasons why potential bidders (and their investment bankers) would choose to pass on this deal because the probable outcome is obvious to anyone who understands Mr. Ellison’s unique relationship with the company”, the investment firm said. NetSuite also formed a special committee of independent board members to consider the deal.
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T. Rowe did give NetSuite’s board credit, though, for setting an “important precedent” by requiring that the deal be approved by a majority of shares not held by Ellison or related entities. Shareholders can take legal action if they believe a deal undervalues their company, provided they do not tender their shares. NetSuite didn’t immediately respond to a request for comment.
