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Oracle’s $28.3 Billion Cerner Deal Draws Pension Fund Suit (1)

Feb. 16, 2022, 3:56 PMUpdated: Feb. 16, 2022, 9:13 PM

A pension fund sued Cerner Corp. in Delaware over concerns that the health technology company’s leaders deliberately “stymied potential bidders” while engineering an unfair $28.3 billion sale to Oracle Corp. without making any effort to explore superior alternatives.

The lawsuit seeks files from Cerner to explore allegations that its board and management steered the company into the Oracle transaction—which includes onerous deal protections like a $950 million termination fee—after spurning other approaches.

They “expressed a clear preference for Oracle and did not follow reasonable steps to obtain a value-maximizing transaction,” for reasons “that may become clear upon a review of the requested materials,” according to the complaint filed Tuesday in Delaware’s Chancery Court.

Cerner’s board “granted exclusivity to Oracle for no charge,” ignored a suitor that expressed interest after news of its Oracle talks leaked, and failed to conduct a meaningful market check, the suit says. “This series of events raises questions as to the board’s discharge of its fiduciary duties.”

Representatives for Cerner didn’t immediately respond to a request for comment Wednesday. Oracle isn’t named as a defendant.

According to the complaint, the run-up to the proposed transaction raises the inference that “Cerner’s senior management was primarily interested not in maximizing shareholder value but in enhancing their own potential compensation packages.”

Golden parachute severance for Cerner’s top executives—including one who previously worked at Oracle—will total more than $64 million, most of it coming in the form of equity awards set to vest “in connection with the merger,” the suit says.

It doesn’t allege any wrongdoing outright. Instead, the complaint seeks documents from Cerner under a Delaware law giving corporate shareholders broad inspection rights if they credibly suspect bad faith or self-dealing. Records cases often reflect an attempt to drum up fiduciary breach claims.

The suit was filed by the Operating Engineers Construction Industry and Miscellaneous Pension Fund.

Cause of Action: Section 220 of the Delaware General Corporation Law.

Relief: Disclosure of relevant company records; costs and fees.

Attorneys: The pension fund is represented by Grant & Eisenhofer PA.

The case is Operating Eng’rs Constr. Indus. & Misc. Pension Fund v. Cerner Corp., Del. Ch., No. 2022-0150, complaint filed 2/15/22.

(Updates story throughout with additional reporting.)

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com