16 May 2023 Cases

Compass Lexecon Clients Oracle and its Key Directors Prevail in Multibillion-Dollar Acquisition Dispute

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Delaware Vice Chancellor Rejects Conflict and Overpayment Claims in their Entirety

On July 28, 2016, Oracle Corporation, a leading provider of application, platform, and infrastructure products and services, announced an acquisition of NetSuite Inc., a provider of cloud-based financials and enterprise resource planning software for medium-sized businesses. The transaction was structured as a tender offer and after two failed attempts, the minimum threshold was reached and the transaction closed on November 7, 2016.

An Oracle shareholder filed suit in Delaware Chancery Court shortly thereafter alleging that Oracle Chairman of the Board and Chief Technology Officer Larry Ellison, Oracle CEO Safra Catz, and Oracle Director Renee James orchestrated the acquisition at an “unwarranted” premium and that the transaction “benefited Ellison at the expense of Oracle.” Plaintiffs alleged that this resulted in an overpayment by Oracle for NetSuite (and resulting damage to Oracle stockholders) of $3 billion, with Mr. Ellison and his family benefitting by almost half of that amount.

Defense counsel Latham & Watkins LLP and Young Conaway Stargatt & Taylor LLP retained Compass Lexecon Chairman and President, Professor Daniel R. Fischel, to rebut Plaintiffs’ damages claims and Compass Lexecon Affiliate, Jonathan F. Foster, to rebut Plaintiffs’ claims regarding the acquisition process. Both experts filed multiple reports and were deposed, with Professor Fischel opining that Plaintiffs’ damages claims were contradicted by the economic evidence and Mr. Foster opining that the process employed by the Special Committee of the Oracle Board in analyzing and agreeing to the acquisition was consistent with custom and practice.

Professor Fischel testified during a two-week trial and Compass Lexecon staff assisted defense counsel in preparing cross-examinations of Plaintiffs’ experts. On May 12, 2023, Vice Chancellor Samuel Glasscock III ruled in favor of Mr. Ellison, Ms. Catz, and Ms. James. He concluded that allegations that Mr. Ellison drove the process and that Ms. Catz and Ms. James acted on his behalf were inconsistent with the evidence and determined that the acquisition represented an appropriate exercise of business judgment by the Oracle Special Committee and Board.

Professor Fischel was supported by a team led by Rahul Sekhar that included Robin Stahl, Andrew Lin, Nabila Lotayef, James Libby, and Lexi Lu. Mr. Foster was supported by a team led by Todd Kendall that included Avisheh Mohsenin and Charles Rice.

Compass Lexecon worked with Peter A. Wald, Blair Connelly, and Jarrod Muller from Latham & Watkins LLP and Elena C. Norman from Young Conaway Stargatt & Taylor LLP, who successfully represented Oracle and its key directors.

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