PeopleSoft: Thumbs Down to Reduced Offer

PeopleSoft has reached a blanket
agreement with disgruntled shareholders who had filed class-action lawsuits
in protest of the Customer Assurance Program (CAP), formed after Oracle moved to
acquire PeopleSoft last June.


The Pleasanton, Calif. software maker, now locked
in a legal battle for control with Oracle, also said that its board of
directors unanimously recommended that PeopleSoft stockholders reject Oracle’s
reduced tender offer of $21 per share.


PeopleSoft instituted the CAP, an initiative that would grant customers two
to five times the cost of their software license fees, if PeopleSoft were
acquired and its products discontinued, shortly after rival enterprise
applications provider Oracle announced its intentions to acquire it.


Now, the U.S. Department of Justice and ten states want to block Oracle’s
unsolicited plans to acquire PeopleSoft, arguing that the merger between two
major enterprise software providers would be anticompetitive and limit
customers’ choices.

Oracle is fighting to thwart the DoJ’s stance. The trial
begins on June 7 and is expected to last six weeks.


The new shareholder settlement holds that if the current CAP is extended
past June 30, 2004, the terms in new contracts will be limited to actions by
Redwood Shores, Calif.’s Oracle.


In other terms of the settlement, PeopleSoft will augment its shareholder
rights plan to provide that redemption decisions during the next two years
will be made by its independent directors, and will amend its bylaws to
allow stockholder nominations for election of directors until 95 days before
the anniversary of the previous year’s annual meeting.


PeopleSoft will also pay the plaintiffs attorneys’ fees and expenses
according to the court’s discretion. The settlement is subject to the
execution of settlement documents and approval by the Delaware Court of
Chancery.


PeopleSoft said shareholders came to terms with the CAP because of the
current antitrust reviews by the DoJ and the European
Commission of the hostile proposal.


The “stockholder class action plaintiffs believe that PeopleSoft’s
Customer Assurance Program, as it relates to Oracle, serves a legitimate
purpose in light of Oracle’s tender offer and other conduct,” PeopleSoft
said in a statement.

In other news, the PeopleSoft board urged shareholders to shoot down
Oracle’s latest, reduced offering for PeopleSoft, the latest in a series of
denials
by the board to thwart Oracle’s plan.


Oracle reduced
its offer price from $26 per share to $21 May 14, saying it reflected a
change in market conditions. With that price offering, Oracle would pay $7.7
billion for the company, compared to its first offer of $5.1 billion at $16
per share.


PeopleSoft said it solicited counsel from Citigroup Global Markets Inc. and
Goldman, Sachs, both of which confirmed that the latest Oracle offer
undervalued PeopleSoft.

News Around the Web