Posted on: Tuesday, November 2, 2004
Oracle raises bid 14% to $24 per share
By Michael Liedtke
Associated Press
SAN FRANCISCO — Oracle Corp. sweetened its hostile bid for rival business software maker PeopleSoft Inc. to $9.2 billion yesterday, a 14 percent increase aimed at resolving their long-running takeover battle.
The new all-cash bid of $24 per share raises the stakes from $21 per share — an offer that Pleasanton, Calif.-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 said its latest bid was its "best and final offer," setting the stage for the climactic scenes in a Silicon Valley soap opera that has featured courtroom confrontations and catty remarks.
The company punctuated its take-it-or-leave-it ultimatum with a promise to abandon the takeover attempt if a majority of PeopleSoft's shareholders don't accept the new offer by midnight EST Nov. 19.
In a statement issued yesterday, PeopleSoft's board advised shareholders to take no action until the directors reviewed Oracle's latest offer "in due course." The statement noted that in February board rejected an Oracle offer of $26 per share — the highest bid made since the standoff began.
Through last week, Oracle said the owners of only 20.2 million PeopleSoft shares — about 5 percent of the outstanding stock — had accepted the $21-per-share offer.
The latest bid represents a 59 percent premium above PeopleSoft's stock price before Oracle launched its bid in June 2003.
PeopleSoft's shares gained $2.16 yesterday to close at $22.93 on the Nasdaq Stock Market, where's Oracle's shares rose 9 cents to close at $12.75.
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.
Meta Group analyst David Yockelson said the strategy also gives Oracle a graceful way to bow out if PeopleSoft rebuffs the bid yet again. "It's really the best of both worlds for Oracle," Yockelson said. "Either they can complete the acquisition at a slight premium to what they would have paid a week ago or they can walk away honorably."
The momentum in the take-over struggle shifted in Oracle's favor in early September when a federal judge rejected a Justice Department lawsuit that sought to block the proposed combination on antitrust grounds.
Europe antitrust regulators last week dropped their objection to a deal between two of the world's three largest makers of business applications software — the computer coding that automates a wide range of administrative tasks.
Oracle's hopes also appeared to brighten about a month ago with PeopleSoft's unexpected firing of Craig Conway as its chief executive. Conway, a former Oracle executive, had spearheaded PeopleSoft's resistance, often taunting his former boss — Oracle CEO Larry Ellison — along the way.
PeopleSoft replaced Conway with chairman and co-founder Dave Duffield, who cultivated an anti-Oracle culture after he started the company in 1987. Since returning as CEO, Duffield has stressed that he didn't come out of semiretirement to sell PeopleSoft, even as other board members have toned down the acrimony and signaled they would be willing to negotiate a friendly takeover if Oracle raised its bid from $21 per share.
Oracle believes a PeopleSoft takeover would create an even more profitable company that's better equipped to compete with business applications software leader SAP of Germany, as well as more diversified technology giants Microsoft Corp. and IBM Corp.
Oracle has said that if it consummates the takeover, it will fire more than half of PeopleSoft's 11,500 employees, but the cutbacks might not be quite as severe under the terms of the revised bid.
Besides changing its price, Oracle promised to introduce a new generation of PeopleSoft products — a move apparently aimed at appeasing many of the 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.
Oracle's product pledge might help the company protect itself from unusual refund guarantees that PeopleSoft has made to its customers. Through Sept. 30, PeopleSoft had pledged to refund up to $2.4 billion to customers if the company is sold and a new owner doesn't provide adequate product support.
Yesterday's higher bid apparently was triggered by Delaware Chancery Court Judge Leo Strine, who is preparing to issue a decision in a recently completed trial contesting two of PeopleSoft's anti-takeover measures. Oracle Chairman Jeff Henley told analysts yesterday that Strine had asked Oracle to put its best offer on the table before he makes his decision.
