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.

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