Major NetSuite shareholder T. Rowe Price has once again pushed Oracle to cough up a lot more money to buy NetSuite.
Oracle has said “no.”
Oracle has offered $109 per share cash, or about $9.3 billion for NetSuite, a financial software company that Oracle’s founder, Larry Ellison, c0-founded and still mostly owns.
On Friday morning, NetSuite disclosed that it had received a letter from T. Rowe Price saying that if Oracle were to offer $133 per share, T. Rowe would be on board.
Oracle, a company known for its masterful negotiations, isn’t budging.
It repeated the warning it gave earlier this month, saying that $109/share was its “best and final offer” and if a majority of NetSuite’s independent shareholders do not accept it and tender their shares by the extended deadline of November 4, Oracle will “respect the will of NetSuite’s unaffiliated stockholders,” and walk away from the deal.
Ellison has recused himself from the shareholder vote, so the deal requires that a majority of NetSuite’s independent shareholders agree to the sale.
But T. Rowe Price, who has more than a 12.9% stake, stirred the pot by arguing that Ellison’s conflict-of-interest role meant NetSuite didn’t get alternative bidders and didn’t get top dollar.
Many shareholders were holding out, to see if Oracle would take the bait and raise its offer. It needs 20.4 million shares to be tendered to close the deal. Earlier this month, it only received 4.6 million shares.
We predict that T. Rowe will bend, and Oracle will buy NetSuite for the price it wants.
The truth is, Oracle is negotiating from a position of strength. It doesn’t need NetSuite’s technology. Oracle now offers a direct cloud competitor to NetSuite. In the past, Oracle sold to bigger companies and NetSuite sold to smaller ones. But Oracle has been increasingly selling to smaller companies, stomping on NetSuite’s jugular.
While Oracle would like to absorb NetSuite’s customers into its all-important cloud business, it can do that the old fashioned way – using its massive salesforce to compete in the market.
In all likelihood, Ellison would be tickled if Oracle’s board bent to T. Rowe’s demands. He would get paid a lot more for his NetSuite stake. At the current $109 price, he’ll walk with $3.5 billion cash.
Oracle knows that Larry Ellison’s ownership of NetSuite makes it extremely unlikely that another company (which would be a competitor to Oracle) would pay more, anyway.
If T. Rowe holds its course, this could turn into a Yahoo/Microsoft situation for NetSuite. Yahoo turned down Microsoft’s $45 billion offer to buy it way back in 2008, and the company slowly spiraled down from there, ultimately agreeing to sell itself to Verizon for $4.8 billion (and may reduce its price even more).