PeopleSoft Investors Sharing a Divided House

PeopleSoft shareholders are starting to speak up about Oracle’s takeover bid.

The Pleasanton, Calif.-based software maker’s two largest investment
groups this week announced opposing thoughts on the current and
best and final offer
of $24 per share (an estimated $9.2 billion) to merge the

Capital Guardian Trust told Oracle executives that
it was in favor of the deal, while Private Capital
filed papers with government regulators supporting PeopleSoft’s position.

Shareholders have until the end of the week to decide. If
Oracle cannot convince the majority that a merger is
a good idea by midnight Nov. 19, the database software vendor said
it would walk away from the deal.

The deal, if completed, would combine the No. 2 and No. 3
enterprise resource planning (ERP) software providers behind SAP AG .
The non-binding straw poll is no guarantee the two companies will merge.

A Delaware Chancery court is
still considering whether to make PeopleSoft remove its so-called “poison pill” and
customer rebate provisions, both anti-takeover measures. PeopleSoft
still has a $1 billion lawsuit against Oracle pending. The case is
expected to start in January.

Oracle and PeopleSoft brass who
have been in close contact with their institutional shareholders fueled the open-air debate.

co-president Safra Catz and CFO Harry You discussed the tender offer in
an open forum this week sponsored by Glass, Lewis & Co., an analytical
research and proxy advisory firm. PeopleSoft has enlisted consultants
at merger and acquisition specialist Innisfree to solicit proxies from
shareholders in support of its own slate of directors.

Hoping to discount the competition but not its own stock, PeopleSoft
issued a statement suggesting that Oracle’s disclosure was nothing more
than a misleading stunt to create the wrong impression that Capital
Guardian endorses the $24 offer.

“We have spoken to Capital Guardian since Oracle issued its release
today and Capital Guardian reiterated that they believe PeopleSoft is
worth substantially more than $24 per share,” PeopleSoft said in a

Oracle declined to comment on PeopleSoft’s rebuttal, but a source
close to the negotiations told the number of
“arbitrage investor” (people who purchase stock
in one market for immediate resale in another) positions in PeopleSoft may have risen as high as
33 percent. That is up from the 20 percent of arbitrage positions
reported last week.

“Most of these institutions don’t want to tender until Friday after
the market closes, because after you tender, you give up certain rights.
It changes the capital market,” the source said on condition of

Market watchers say Oracle should issue a statement Friday after the
bell to update the status of the tender offer, but the chance of
announcing an agreement between the two companies remains uncertain.

If Oracle has more than 50 percent, analysts suggest PeopleSoft’s
board could still hold out for the Delaware decision. But this could
spark a movement to replace PeopleSoft’s current board at its
annual shareholder meeting in March 2005.

Oracle tried to stage a major
board shift last year but withdrew its slate when the U.S. Department of
Justice filed its antitrust lawsuit.

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