Summary
Oracle Corporation (ORCL) announced on June 29, 2011, its agreement to acquire Pillar Data Systems, Inc. This acquisition is noteworthy due to Pillar Data's ownership structure. Pillar Data is majority-owned and controlled by Oracle's CEO, director, and largest stockholder, Lawrence J. Ellison. The transaction structure involves an "earn-out" payment mechanism, meaning no upfront payment will be made to Pillar Data or its stakeholders, including Mr. Ellison. Instead, payments will be contingent on Pillar Data's future revenues and are subject to specific conditions and a 3x multiple of certain revenues, reduced by net losses. The Independence Committee of Oracle's Board of Directors, comprised solely of independent directors, led the negotiations and reviewed the transaction terms to ensure fairness to Oracle and its stockholders. Mr. Ellison recused himself from these discussions. The Earn-Out payment is scheduled to be made on or before November 30, 2014, following twelve full fiscal quarters after the closing. Oracle does not expect the Earn-Out or its potential impact to be material to its financial results.
Key Highlights
- 1Oracle Corporation to acquire Pillar Data Systems, Inc. via a merger agreement dated June 29, 2011.
- 2Pillar Data is majority-owned and controlled by Oracle CEO Lawrence J. Ellison.
- 3The acquisition is structured with an "earn-out" payment, meaning no upfront cash is exchanged.
- 4The earn-out payment is contingent on Pillar Data's future revenues (3x multiple, reduced by net losses) and payable by November 30, 2014.
- 5Oracle's Independence Committee, composed of independent directors, negotiated and approved the terms, ensuring fairness to Oracle and its stockholders.
- 6Lawrence J. Ellison recused himself from the Independence Committee's deliberations.
- 7Oracle anticipates the earn-out and its potential impact will not be material to its financial results.