PeopleSoft rejects Oracle’s takeover bid

Michael Liedtke

Thursday, Nov. 11, 2004 | 9:08 a.m.

SAN FRANCISCO -- PeopleSoft Inc.'s board of directors rejected Oracle Corp.'s $9.2 billion takeover bid Wednesday and vowed to continue its staunch resistance even if a majority of the business software maker's shareholders decide to accept the offer.

After more than a week of deliberation, PeopleSoft's board unanimously concluded Oracle's latest $24-per-share bid was inadequate. It marked the fifth time the Pleasanton-based company has snubbed its bitter rival since the takeover battle began more than 17 months ago.

"We absolutely believe PeopleSoft is worth far more today than at any point since this process began," said George "Skip" Battle, the lead director on PeopleSoft's transaction committee.

Many analysts disagree with that assessment, saying PeopleSoft's market value has been propped up by Oracle's takeover bid. If Oracle withdraws its bid, some analysts fear PeopleSoft's stock will plunge by more than 30 percent.

PeopleSoft's shareholders theoretically could override the board's recommendation by offering their shares to Oracle by a Nov. 19 deadline.

Should a shareholder majority side with Oracle, Battle and other board members said the directors still intend to use whatever measures necessary to force the issue to a final vote at PeopleSoft's annual meeting next spring.

If a majority of shareholders don't accept the bid by the Nov. 19 deadline, Oracle says it will take its offer off the table and begin shopping around for other acquisitions.

"Oracle has been at this for a year and half and it is now time to bring this matter to a close," said Oracle CEO Larry Ellison. "On Nov. 19, we will respect the will of the shareholders."

PeopleSoft announced its board's decision after the stock market closed Wednesday. PeopleSoft's shares declined 23 cents to finish at $22.79 on the Nasdaq Stock Market, then fell by another 34 cents in extended trading.

Battle left the door open for friendly negotiations, but only if Oracle pushes the bidding beyond $26 per share -- the highest previous offer in the odyssey. "We are not going to sell PeopleSoft for less than it's worth," Battle said during a Wednesday interview.

Redwood Shores-based Oracle insists it won't raise the stakes, maintaining PeopleSoft's sales prospects have deteriorated significantly since the beginning of the year.

PeopleSoft tried to reverse the tables on Oracle Wednesday, asserting its rival is struggling to sell business applications software -- the computer coding that automates a wide range of administrative tasks.

Oracle's sales of application software licenses declined 36 percent in its latest quarter while PeopleSoft's rose slightly. PeopleSoft expects an even stronger 2005. The company told analysts during a Wednesday conference call that its 2005 earnings will range from 82 cents to 87 cents per share, topping the current mean estimate of 77 cents per share among analyst polled by Thomson First Call.

Several analysts participating in the conference call expressed doubts that PeopleSoft would be able to deliver on its rosy 2005 forecast, noting that management had previously provided bullish 2004 projections only to lower them later.

In anticipation of Wednesday's cold shoulder, Oracle has been trying to persuade PeopleSoft's major shareholders that its all-cash offer represents their best moneymaking opportunity.

PeopleSoft's board believes many shareholders will offer up their shares to Oracle because they don't have enough time to analyze the company's improving financial outlook, Battle said. In an interview, PeopleSoft CEO Dave Duffield -- the company's co-founder and largest individual stockholder -- said he regards the number of shares that accept Oracle's offer to be a nonbinding "straw poll."

Shareholder Value Management analyst Jeff Embersits said it would be "ridiculous and irresponsible" for PeopleSoft's board to continue its resistance if a majority of stockholders want to accept the Oracle offer. "The shareholders own this company, so they should be allowed to sell if they want," Embersits said. "There shouldn't be any recourse for a board to decide it's smarter than the shareholders."

No matter what shareholders do, PeopleSoft's board can still block the deal by using a legal defense known as a "poison pill." This measure is designed to make undesired takeover attempts prohibitively expensive.

If PeopleSoft's board tries to override the will of its shareholders, Oracle intends to ask a Delaware judge to invalidate the poison pill in a court hearing scheduled Nov. 24.