(Updates with details of purchase in third paragraph.)
Sept. 30 (Bloomberg) -- Oracle Corp. was sued by a retirement fund over its purchase of Pillar Data Systems Inc., a company controlled by Chief Executive Officer Larry Ellison.
The City of Roseville Employees’ Retirement System sued on behalf of Oracle and named among the defendants Ellison, Oracle President Mark Hurd and Chairman Jeff Henley, according to papers filed yesterday in Delaware Chancery Court in Wilmington. A judge granted the pension fund’s request to file its complaint under seal.
Oracle said in June that it would buy San Jose, California- based Pillar in a deal that required no up-front payments and allowed for an “earn-out” payment that would be made by Nov. 30, 2014, according to a filing with the U.S. Securities and Exchange Commission.
Ellison owns about 55 percent of Pillar, a provider of data-storage systems, according to the SEC filing. Under terms of the deal, the outstanding amount of a $544 million loan Pillar owes to Ellison will be converted into preferred shares with a right to dividends accruing at an annual rate of 1.5 percent.
Those shares will be canceled after the transaction closes in exchange for rights to receive a portion of the earn-out, according to the SEC filing.
The pension fund’s complaint accuses the Oracle board of breaching its fiduciary duty in connection with the acquisition, according to the court filing.
Deborah Hellinger, a spokeswoman for Redwood City, California-based Oracle, declined to comment on the lawsuit.
The case is City of Roseville Employees’ Retirement System v. Ellison, CA6900, Delaware Chancery Court (Wilmington).
--With assistance from Phil Milford in Wilmington, Delaware. Editors: Stephen Farr, Mary Romano
To contact the reporter on this story: Sophia Pearson in Wilmington at email@example.com.
To contact the editor responsible for this story: Michael Hytha at firstname.lastname@example.org.