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PeopleSoft 'Poison Pill' Hearing on Ice

UPDATED: A federal judge has postponed his decision on PeopleSoft's last hostile takeover defense against Oracle until next month.

Delaware Chancery Court Judge Leo Strine said he would need more information from both companies before rendering a decision on PeopleSoft's so-called "poison pill" and customer rebate provisions. The anti-takeover measures are designed to make it harder for Oracle to acquire PeopleSoft. The judge set aside Dec. 13 and 14 as possible hearing dates but did not say when he would render his decision.

The judge specifically said he wants to know why PeopleSoft's board recently rejected Oracle's "best and final offer" of $24 per share (an estimated $9.2 billion).

"Our board has rejected the offer because they feel it is inadequate," PeopleSoft spokesperson Steve Swasey told internetnews.com. "We have reiterated that time and again that the board will not sell the company for less than it is really worth."

The judge also declined PeopleSoft's requests to delay the hearings further until after the New Year. Lawyers for the Pleasanton, Calif.-based software maker asked to present their evidence closer to its annual shareholder meeting in March.

The suit filed in Delaware claims PeopleSoft's Customer Assurance Program (CAP) and subsequent "poison pill" are "unlawful" because the CEO at the time -- Craig Conway -- misled investors and sheltered his own board into believing that "there is no condition" under which PeopleSoft would ever be acquired by Oracle.

Oracle claims PeopleSoft's board did not review the CAP plan and that Conway kept a tight control over the board's advisement attorneys and bankers. According to court documents, there were more than $2 billion in CAP contracts as of June 30, 2004.

Back in October, four PeopleSoft board members -- Skip Battle, Cyril Yansouni, Steven Goldby and Mike Maples -- all told the court that the CAP was necessary to main the integritiy of stockholder value. Swasey said it was too early to tell which if any of the directors would speak on the board's behalf in December.

Oracle claimed victory over the weekend after a straw poll vote of PeopleSoft shareholders showed 61 percent support of the takeover. Oracle received a vote of confidence from PeopleSoft's third largest investor, Los Angeles-based Capital Guardian Trust as well as the California Employees' Retirement System (CalPERS), New York State Common Retirement Fund and Ohio's state pension fund. Oracle said it will now keep the offer on the table until 6:00 p.m. (EST) on Friday, December 31, 2004.

Now that a majority of PeopleSoft shares have been tendered to Oracle, Robert Christopher, an attorney specializing in litigation for technology companies for Coudert Brothers in Palo, Alto, Calif., said the legal wrangling should become moot.

"By acquiring the shares, Oracle can effectively take over the board of directors, eventually nullify the poison pill, and dismiss outstanding legal claims. However, PeopleSoft customers who purchased or did anything else in reliance on the rebate program will have rights that Oracle probably must recognize and compensate. That leaves some room for negotiation so that, if good sense prevails, the bitter war that we've been witness to should end very soon. Unfortunately, competition and the pace of innovation are the big losers in this situation (though spin doctors will later cite whatever new products are developed to claim otherwise)."

If the battle for control of PeopleSoft stretches into next year, most analysts polled by internetnews.com suggest a tougher time for Oracle to reach its goal. PeopleSoft still has a $1 billion lawsuit against Oracle pending. The case is expected to start on Jan. 10.