Oracle to PeopleSoft: It’s Your Best Deal

One day before its $9.2 billion offer to acquire rival PeopleSoft expires, Oracle made another pitch to PeopleSoft’s shareholders in a bid to convince investors to take the deal.

In an open letter from Oracle Board Chairman Jeff Henley, Oracle attacked PeopleSoft’s recent financial projections and noted that
financial analysts, such as S.G. Cowen’s Drew Brosseau, said
PeopleSoft’s Q4 and 2005 guidance suggests the company is trying to convince shareholders not to tender their shares.

“This is not a new tactic for PeopleSoft,” Henley said. “It is well
understood that the financial guidance PeopleSoft issued in the third
quarter of 2003 as a basis for rejecting Oracle’s tender offer was
unachievable at the time, and it has not been achieved.

“We suggest you consider this track record when evaluating what PeopleSoft’s board is telling you now and in deciding whether to tender your shares,” the letter said.

The latest pitch comes after PeopleSoft’s two largest shareholder groups remained
split on whether to agree to Oracle’s latest offer of
$24 per share.

PeopleSoft shareholder group Capital Guardian Trust told Oracle executives
that it was in favor of the deal. But shareholder group Private Capital filed papers with government regulators supporting the board of PeopleSoft’s position to reject the bid.

That $24 per share bid is a 60 percent premium to PeopleSoft’s stock value
at the time of the original offer from June 2003.

Oracle, whose final offer is set to expire at midnight EST, November 19,
would become the second largest applications provider behind Germany’s SAP
should the deal succeed.

Unless more than 50 percent of the Pleasanton, Calif., software maker’s 188
million outstanding shares are tendered, Oracle will withdraw its offer. In
previous letters, CEO Larry Ellison has said Oracle could not waste any more
time, money or resources on the pursuit of its rival.

Should Oracle receive a majority of shares, it will seek to have the board or a court remove the poison pill PeopleSoft installed to defend against a hostile takeover. The poison pill would considerably raise the purchase price for PeopleSoft.

Henley also addressed the poison pill in his letter:

“They have failed to deliver an alternative transaction to deliver value to stockholders, and seem determined to use the poison pill indefinitely to deny stockholder choice,” he said.

A Delaware Chancery court is still considering whether to make PeopleSoft remove its so-called “poison pill” and customer rebate, both anti-takeover measures.

While PeopleSoft still has a $1 billion lawsuit pending against Oracle over the takeover attempt, the decision by the shareholders would cap 17 months of legal wrangling.

In a telling tale of just how split the camps have been, the PeopleSoft shareholder groups aren’t the only entities that were divided: the U.S. Department of Justice voted against the deal, while the European Commission approved it.

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