Module: Corporate Finance Answer the following questions. “Oracle chairman Larry Ellison, once a vocal critic of the new era of cloud computing, is set to make a personal profit of $3.5 billion from his company’s takeover of cloud company NetSuite. The software group’s all-cash acquisition for $9.3 billion, which was announced on Thursday, marks Mr Ellison’s biggest deal since he bought PeopleSoft 11 years ago. The billionaire Oracle co-founder will increase his fortune as he is also the largest shareholder [with a 40% ownership] in NetSuite. Oracle’s $109 a share offer represents a near 30% premium to NetSuite’s closing price on Tuesday, before rumours of a bid approach started to circulate. [Upon the deal announcement,] Oracle shares were down 15 cents at $40.78 per share in midday trading in New York, while NetSuite jumped 18% to $108.” Oracle chairman Larry Ellison set to net $3.5bn from NetSuite deal, Financial Times 28/07/2016 by Richard Waters, Pan Kwan Yuk and James Fontanella-Khan a) Discuss the potential conflicts of interest in the evaluation, negotiation, and approval of the takeover in the Oracle takeover of NetSuite. What would Oracle and NetSuite do to minimize such conflicts of interest? b) Discuss the empirical evidence on deal announcement returns of the target and of the acquirer in corporate takeovers with regards to the public status of acquirer and the target, respectively, and the method of payment. c) Discuss whether the market reactions in the Oracle-NetSuite case are consistent with such empirical evidence.
