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Oracle-NetSuite Agreement: The Basics

By Brent Nyitray, CFA, MBA

Aug. 4 2016, Updated 10:57 a.m. ET

Basics of the transaction

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Merger conditions 

  • minimum tender condition (majority of non-affiliated shares)
  • Hart-Scott-Rodino Antitrust Improvements Act of 1976
  • any other regulatory requirements

Note that Larry Ellison and his family own approximately 45% of NetSuite stock. The minimum tender condition requires a majority of the unaffiliated shares, or in other words, the majority of the remaining 55%.

Non-solicitation agreement

NetSuite agreed to a non-solicitation agreement with a fiduciary out. This means that during the pendency of the merger, NetSuite may not shop itself or contact other potential buyers.

That said, if NetSuite receives an unsolicited approach in writing, which could lead to a superior offer, it’s permitted to discuss a deal with the potential buyer in accordance with its fiduciary duty to maximize shareholder value. If NetSuite accepts a higher offer, it will owe Oracle a termination fee of $300 million.

Merger arbitrage resources

Other important merger spreads include the deals between Cigna (CI) and Anthem (ANTM) and between KLA-Tencor (KLAC) and Lam Research (LRCX). For a primer on risk arbitrage investing, read Merger Arbitrage Must-Knows: A Key Guide for Investors.

Investors interested in trading in the technology sector can look at the iShares Global Technology ETF (IXN).


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