Opower Board Avoids Investor Suit Over Oracle $532M Acquisition

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By Yin Wilczek

An investor lawsuit alleging Opower Inc.'s board breached its legal duties in connection with the company’s $532 million sale to Oracle Corp. was dismissed by a Delaware state court.

Shareholder Peter van der Fluit said in his complaint that Opower’s board allowed a controlling group of stockholders comprising directors, officers and others to steer the company into an undervalued deal that provided insiders with substantial benefits.

The Delaware Chancery Court Nov. 30 granted the board’s motion to dismiss, even though it found that the company failed to make material disclosures about the identities of fiduciaries who negotiated the deal. The investor, the court said, didn’t plead enough facts to show the board breached duties not otherwise covered by an exculpatory provision in Opower’s charter that protected directors against monetary liability.

Oracle announced in May 2016 that it bought Arlington, Va.-based Opower, a provider of cloud-based software for the utility industry, for $532 million.

Failure to Disclose

Because of Opower’s disclosure shortfalls, the chancery court declined to apply a 2015 decision by the state high court that has made it more difficult for shareholders to sue corporate insiders over mergers. In that 2015 decision, Corwin v. KKR Financial Holdings LLC, the Delaware Supreme Court ruled that state courts must limit their reviews of certain deals that are approved by a majority of fully informed and disinterested shareholders.

Vice Chancellor Tamika Montgomery-Reeves found that Corwin didn’t protect the Opower directors because shareholders weren’t fully informed when tendering their shares. The company’s proxy relating to the sales transaction didn’t identify specific Opower representatives involved at key stages of the negotiation, she said.

As a result, shareholders couldn’t determine whether the negotiators were Opower board members who stood to receive post-merger employment and the conversion of their unvested Opower options into unvested Oracle options, or directors who received only cash payment, the judge found. “The vague language regarding the identities of the negotiators prohibited Opower stockholders from determining the interests of those fiduciaries who negotiated the deal on behalf of the stockholders, which I find to be a material disclosure violation.”

The case is Van Der Fluit v. Yates , 2017 BL 429987, Del. Ch., No. 12553-VCMR, 11/30/17 .

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bloomberglaw.com

To contact the editor responsible for this story: Susan Jenkins at sjenkins@bloomberglaw.com

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