Oracle boosts bid for PeopleSoft

Monday, November 1st 2004, 10:47 am
By: News On 6

SAN FRANCISCO (AP) _ Oracle Corp. sweetened its hostile bid for rival business software maker PeopleSoft Inc. to $9.2 billion Monday, a 14 percent increase aimed at resolving the long-running takeover battle between the bitter foes.

The new all-cash bid of $24 per share raises the stakes from $21 per share _ an offer that Pleasanton-based PeopleSoft rejected as inadequate in May. It marked the fourth time that Redwood Shores-based Oracle has revised its bid since it began its attempt to buy PeopleSoft nearly 17 months ago.

Oracle described its latest bid as its ``best and final offer,'' determined to resolve a soap opera that has featured acerbic exchanges between both sides. The company also said it will abandon the takeover attempt if a majority of PeopleSoft's shareholders haven't accepted the new offer by a midnight EST Nov. 19 deadline.

``We think the time has come for the stockholders of PeopleSoft to decide the outcome,'' Oracle chairman Jeff Henley said during a Monday conference call with analysts.

It makes sense for Oracle to draw a line in the sand because the ordeal has become a distraction for both companies, said AMR Research analyst Bruce Richardson. ``It looks like we are finally going to know what is going to happen in another 2 1/2 weeks,'' he said.

PeopleSoft's board has staunchly resisted Oracle's takeover bid, although the directors have recently signaled they would be willing to negotiate if its suitor raised the offer from $21 per share.

In a statement issued Monday, PeopleSoft's board advised the company's shareholders to take no action until the directors reviewed Oracle's latest offer ``in due course.'' The board's statement noted that in February it rejected an Oracle offer of $26 per share _ the highest bid made since the stand-off began.

PeopleSoft's shares gained $2.18 to $22.95 in early trading Monday on the Nasdaq Stock Market. Oracle shares were up 4 cents, at $12.70, also on the Nasdaq.

Investors have widely anticipated Oracle would up the ante from $21 per share since PeopleSoft fired Craig Conway as its chief executive a month ago. Conway, a former Oracle executive, had spearheaded PeopleSoft's resistance, often taunting his rival in the process.

As PeopleSoft's directors began to court a higher bid, Oracle management suggested the company was leaning toward lowering the offer to reflect the weakened condition of its takeover target.

Monday's higher bid apparently was triggered by a Delaware Chancery Court Judge Leo Strine, who is preparing to issue a decision in a recently completed trial contesting two of PeopleSoft's antitakeover measures. Henley told analysts Monday that Strine had asked Oracle to put its best offer on the table before he makes his decision.

``We think it's a very rich price,'' Henley said.

The higher bid represents a 59 percent premium to PeopleSoft's stock price before Oracle first launched its bid in June 2003.

If PeopleSoft's board refuses to drop an antitakeover provision known as a ``poison pill,'' Oracle intends to urge Strine to force the company to abandon the defense.

Some industry analysts believe Oracle can afford to pay even more PeopleSoft _ a position that might give PeopleSoft's board the grounds for rejecting the latest offer. Just last week, Lehman Brothers analyst Neil Herman issued a report justifying why PeopleSoft might be worth as much as $27 per share to Oracle.

PeopleSoft is also coming off a surprisingly strong third quarter _ another potential bargaining chip.

``My gut is that PeopleSoft's board will reject this offer and PeopleSoft will still be an independent company come Nov. 20,'' Richardson said.

Oracle's revised offer doesn't just change the price. The company also said it will introduce a new generation of PeopleSoft products _ a move apparently aimed at appeasing many of PeopleSoft customers who opposed the takeover attempt. Oracle previously had planned to stop developing new PeopleSoft products while supporting the existing lines of the company's software for at least a decade.

The U.S. government, backed by PeopleSoft, had tried to derail the Oracle takeover, alleging in an antitrust lawsuit that the proposed combination would hurt the users of business applications software _ the computer coding that automates a range of administrative tasks.

A federal judge rejected the antitrust lawsuit in September, helping to fortify Oracle's bid. Europe's antitrust regulators gave their antitrust blessing last week, setting the stage for Oracle's sweetened offer.