Sun Corruption Probe, Lawsuits Could Complicate Oracle Takeover

Three weeks after Oracle announced its $7.4 billion proposal to take over Sun Microsystems, federal filings reveal potential speed bumps.

Companies Mentioned
Posted on May 11, 2009

In a development that could complicate its acquisition by Oracle Corp., Sun Microsystems Inc. said in SEC filings that it recently discovered internal activities in unidentified foreign countries that may have violated the U.S. Foreign Corrupt Practices Act.

At the same time, also in federal filings, Sun said it is facing three shareholder class action suits alleging that Oracle’s proposal to pay $9.50 per share, or $7.4 billion, for Sun is “unfair and inadequate.”

Sun disclosed the potential violation of federal FCPA regulations in documents it filed with the SEC in connection with its recent third-quarter earnings. Sun indicated that it conducted an investigation of the alleged violations using outside legal counsel and that it has taken unspecified “remedial actions.” Still, the company acknowledged that the alleged violations could lead to criminal charges and/or fines and could have a material impact on its business.

In its own SEC filing, Oracle said it had been made aware of the possible FCPA violations prior to signing the definitive agreement to buy Sun on April 20. Oracle officials did not say whether the disclosure or the pending shareholder suits will affect its offer to buy Sun. In a report published last Thursday, however, Oracle Chairman and CEO Larry Ellison indicated that Oracle plans to go through with the deal and to retain Sun’s hardware business, including its SPARC microprocessor product line.

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