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Oracle to PeopleSoft: 'Best and Final Offer'

UPDATED: Oracle has upped its offer for PeopleSoft to $24 per share, in what it called its final bid for the elusive enterprise applications company it has been trying to acquire since June 2003.

The revised offer is $3 per share higher than its previous offers and brings the total bid to about $8.8 billion. Oracle was buoyed by last week's vote by the European Commission to clear its offer.

The Redwood Shores, Calif.-based Oracle also agreed to eliminate most conditions on the offer, noting that 50 percent or more of PeopleSoft's shares must be tendered and that PeopleSoft's board must remove two procedural anti-takeover blocks -- its poison pill provisions and Delaware law obstacles that protect companies from hostile takeovers.

However, if a majority of PeopleSoft's shares are tendered and the board has not removed the poison pill and law obstacles, Oracle said it will look to the Delaware Chancery Court to take action. A court is still mulling whether to make PeopleSoft remove its poison pill provisions.

Oracle Board Chairman Jeffrey O. Henley discussed Oracle's positioning on a conference call:

"The price is substantially higher than where PeopleSoft's shares would trade were it not for our offer," Henley said, noting that it was the Delaware Chancery Court judge who urged Oracle to make "our best and final offer. We think it is incumbent on the PeopleSoft Board to show at least equal deference to the will of its own stockholders."

The amended offer will expire at midnight Eastern Standard Time on Friday, Nov. 19. Oracle will withdraw its offer if a majority of PeopleSoft's shares have not been tendered into the offer.

In a statement, PeopleSoft advised its stockholders to take no action at this time in response to Oracle's revised bid.

"PeopleSoft's Board of Directors, consistent with its fiduciary duties, will meet to review the amended tender offer and make its recommendation to PeopleSoft stockholders in due course," the company said.

Previously, PeopleSoft's Board has unanimously rejected all of Oracle's unsolicited offers suggesting that each of the last four bids (between $26.00 to $21.00 per share) "undervalued PeopleSoft."

PeopleSoft also said it will continue with its $1 billion lawsuit against Oracle, which is scheduled to go to trial before a jury on January 10, 2005. PeopleSoft's complaint alleges that Oracle has engaged in unfair business practices, including a deliberate campaign to mislead PeopleSoft's customers and disrupt its business.

Both the EC's recent decision and a federal judge's decision to throw out the Department of Justice's lawsuit against Oracle could be major blows to PeopleSoft's defense.

Interestingly, the EC, which has generally followed several rulings from the DoJ with similar findings, said there was not enough evidence to suggest that competition would suffer if the two concerns merged. The EC said the enterprise software market segment has other players with multinational activities beside Oracle, PeopleSoft and market leader SAP AG.

In September, U.S. District Court Judge Vaughn R. Walker ruled that the DoJ had failed to build a convincing case that the takeover would harm competition in the market for certain enterprise software applications. In a month-long trial, the DoJ repeatedly claimed the deal would create a monopoly in the enterprise resource planning (ERP) market, limiting choices to just SAP and Oracle.

PeopleSoft's board, which fired ex-CEO Craig Conway on October 1, continues to refuse to meet with Oracle to negotiate a deal; but shareholders may force the board's hand.

Ultimately, this is what Oracle expects to happen and the company has specific plans for the Pleasanton, Calif., outfit going forward. Henley and CEO Larry Ellison sent a letter to the PeopleSoft board Sunday promising to develop and introduce a next generation of PeopleSoft products and will maintain an engineering unit at the Pleasanton campus.