The price of purchasing PeopleSoft just dropped by
$1.7 billion, Oracle executives said Friday.
The Redwood Shores, Calif.-based database software vendor said it has
revised its tender offer for all of the outstanding shares of PeopleSoft to
$21 per share, or approximately $7.7 billion. Previously, Oracle was
prepared to shell out $26 per share, or $9.4 billion, for its rival.
“Our revised offer reflects changes in market conditions and in
PeopleSoft’s market valuation,” Oracle Chairman and CFO Jeff Henley said in
a statement. “Our new offer represents a premium of 21 percent over
PeopleSoft’s closing price today of $17.30. That’s a higher premium than our
previous offer was on the date made, calculated on both a single day and 30
day moving average basis. I believe that this deal will benefit stockholders
of both companies.”
Executives with Pleasanton, Calif.-based PeopleSoft were unfazed by the
news and are asking stockholders to reject the offer.
“Given the significant antitrust obstacles in both the United States and
Europe, we do not believe Oracle’s bid can be completed at any price,”
PeopleSoft said in a prepared statement. “We note that Oracle has timed this
announcement on the eve of our annual Leadership Conference, our most
significant customer event for senior executives, with more than 2,500
attendees. This is one more instance of what we firmly believe is Oracle’s
ongoing effort to damage our business.”
This marks the third time Oracle has revised its unsolicited bid. Each
time, PeopleSoft’s leadership complained that the offers were “undervalued,”
and this time is no different. Still, the company said its board will take a
look at the reduced offer at a regularly scheduled board meeting later this
month.
The acquisition banter will all be for naught should a lawsuit by the
U.S. Department of Justice and ten states prevail. The trial is scheduled to
begin on June 7 at the U.S. District Court in San Francisco and is expected
to last six weeks.
Earlier in the day, Oracle president Chuck Philips told New York
investors that the company should know for sure by August whether or not it
will be able to pursue PeopleSoft in any sort of capacity. If so, he
said, the purchase would be quick and wrapped up by the end of the
year.
The two sides are scheduled to give the judge a technology tutorial on May
21. The government’s argument is that the merger between two major
enterprise software providers would be anti-competitive and limit customers’
choices to just Oracle and the German market leader SAP .
“For its part, the DOJ’s toughest task will be to justify preventing a
company from becoming a more effective competitor against a dominant rival,”
Rob Christopher, head of litigation for the law firm Coudert Brothers, told internetnews.com. “Throw in the politically incorrect but
possibly influential distinction that the applicant now is an American
company and the dominant rival is European, and there could be a judicial
perception that this move would be net pro-competitive. On balance, however,
I believe in the power and magic of threes. This particularly applies to
competitive dynamics in otherwise relatively concentrated markets. I do not
expect the court to disrupt that magic here. My money is on the DOJ.”
Still, Oracle faces a potentially tougher challenge from the European
Commission, which is investigating the anti-competitive claims but has yet
to issue its formal opinion. Even after that, a federal judge has set
November 1 as the trial date for PeopleSoft’s legal
case against Oracle. PeopleSoft claims Oracle’s advances amount to
unfair business practices, trade libel and tortuous interference. A
mountain of obstacles to be sure for Oracle, according to Melanie Hollands,
president of Koala Capital, a hedge fund that focuses on technology stocks.
“There’s a 10 to 15 percent chance Oracle prevails in the early rounds.
There is a 25 percent chance that Ellison gets tired of messing around and
drops it,” Hollands told internetnews.com. “The company’s apps
development efforts are in a high state of confusion, and the best solution
is simply to focus on what needs to be done, that is, drop the takeover bid.
However, doing so would force people at Oracle to recognize that it has a
tier two-ish solution , which is not what it wants. So the games continue.”
