Wed Sep 7,
2016 2:50pm EDT
NetSuite shareholder T. Rowe
Price opposes sale to Oracle
Traders gather at the post where
Oracle is traded on the floor of the New York Stock Exchange
(NYSE) in New York City, U.S., July 28, 2016.
Liana B. Baker
Investment manager T. Rowe Price Group Inc
expressed opposition to Oracle Corp's proposed acquisition of U.S.
cloud computing company NetSuite Inc, saying the $9.3 billion deal
price is too low.
In a letter NetSuite made public on
Wednesday, T. Rowe told the company's board that it would not tender
its shares. This could put pressure on Oracle Chairman Larry Ellison
to consider making a new offer to combine his software company with
NetSuite, in which he holds a 40 percent stake.
A majority of NetSuite shareholders not
affiliated with Ellison must tender their shares for the deal to
happen. As the company's largest shareholder after Ellison with an 18
percent stake, T. Rowe could significantly influence the outcome.
Large mutual fund managers rarely make their
views public. Most prefer to pressure corporate executives in private
meetings or to sell shares of companies whose strategies they
question, although T. Rowe has been the occasional exception.
Chris Davis, a partner in law firm Kleinberg
Kaplan who focuses on M&A and activism, welcomed T. Rowe's letter,
because it gives companies "clear guidelines for the future about what
they will have to do to satisfy their most sophisticated institutional
T. Rowe, NetSuite and Oracle declined to
Oracle said in July that it would buy
NetSuite for $109 per share in cash to increase its ability to help
its corporate customers automate administrative operations.
NetSuite stock was trading just above that
price at $109.30 on Wednesday, indicating some investors expected a
T. Rowe said it was disappointed NetSuite
did not reach out to other potential buyers before agreeing on a price
"At $109 per share, our preference is for
NetSuite to remain independent," T. Rowe said.
It added that potential bidders would
probably avoid NetSuite because of its "unique relationship" with
"In our view, the inherent conflicts of
interest between NetSuite, the Ellison entities and Oracle are
daunting and may be impossible to manage," T. Rowe said.
T. Rowe, however, said it appreciated some
conditions NetSuite put into place, such as the minimum acceptance
threshold in the tender offer. NetSuite also formed a special
committee of independent board members to consider the deal.
In 2013, T. Rowe opposed Michael Dell’s deal
to take his eponymous computer maker private.
Shareholders can take legal action if they
believe a deal undervalues their company, provided they do not tender
their shares. Dell had to pay tens of millions of dollars to
shareholders following such a lawsuit.
(Additional reporting by Ross Kerber in
Boston and Narottam Medhora in Bengaluru; Editing by Tom Brown and
Lisa Von Ahn)