A fed-up Oracle warns NetSuite shareholders that it might withdraw its $9.3 billion offer

Oracle is playing an unusual game of chicken with the shareholders of NetSuite. On Friday, Oracle extended the deadline for its offer to buy Netsuite a second and final time, it said.

Oracle warned that if more shareholders don't get onboard by the new deadline, November 4, Oracle will walk away from the deal altogether.

It said in a press release (emphasis ours):

"This will be the final extension that Oracle is obligated to make under the merger agreement. In the event that a majority of NetSuite's unaffiliated shareholders do not tender sufficient shares to reach the minimum tender condition, Oracle will respect the will of NetSuite's unaffiliated shareholders and terminate its proposed acquisition."

Oracle has offered to buy Netsuite for $109 a share cash, or about $9.3 billion, a 19% premium over the price of the shares before the offer was made.

Oracle founder and executive chairman also helped found and fund Netsuite, so he owns most of the company. While he clearly wants to sell (he'd pocket $3.5 billion cash), he's recused himself from voting on the merger.

That means that a majority of the independent shareholders must agree to the deal by tendering their shares. Oracle needs 20.4 million shares to be tendered to close the deal. As of Thursday, it only has 4.6 million shares.

Wanting more money

That's likely because T. Rowe Price, one of the world's largest mutual funds who has a more than 12.9% stake in NetSuite, opposed the deal.

T. Row Price believed that Ellison's conflict-of-interest position led to an offer that was too low and no bidding process. And the 19% premium is lower than the average 26% premium for all above $1 billion M&A deals to date, reported the Wall Street Journal.

However, the DoJ is unconcerned. Oracle received regulatory approval for the deal in September, as long as a majority of independent shareholders approved, too.

Still, it seems many shareholders were holding out for more money.

But it's doubtful that will happen. Oracle is playing this game of chicken from a position of strength. With Larry Ellison's stake, Netsuite would be hard pressed to find another buyer at all, much less one willing to pay more.

That's because both of these companies sell similar financial software. In the past, Oracle sold its version as old-fashioned software installed in a company's data center. It was very expensive, so only the biggest companies could afford it. Netsuite sold its software as a cloud service, affordable for smaller companies.

But Oracle now offers a direct cloud competitor to Netsuite and has been increasingly selling to smaller companies. Any company wanting to buy Netsuite would be a direct competitor to Oracle and would have to be willing to write a huge, multi-billion check directly to Ellison. This assumes Ellison would have to recuse himself from voting on the offer, and couldn't simply veto it.

Oracle doesn't need NetSuite's technology. While Oracle would like to absorb Netsuite's customers into its all-important cloud business, it can do that the old fashioned way, through its massive salesforce.

This offer was in equal parts a customer grab and a soft-landing for Netsuite's shareholders, of which Ellison is the biggest. If the rest of the shareholders don't see that, Oracle is willing to say, "So be it."