Oracle asks court to cut obstacles
By Michael Liedtke
Associated Press
SAN FRANCISCO — Invigorated by a pivotal antitrust victory, Oracle Corp. further turns the screws on takeover target PeopleSoft Inc. this week, attacking in court two countermeasures used to thwart the business software maker's $7.7 billion acquisition bid.
Redwood Shores, Calif.-based Oracle wants Delaware Chancery Court Judge Leo Strine to nullify an anti-takeover defense commonly known as a "poison pill," as well as an unusual sales program that has promised $2 billion in customer refunds if PeopleSoft is bought and a new owner diminishes product support.
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The trial, scheduled to begin tomorrow and continue for two weeks, promises another fireworks display in a drama between two Silicon Valley rivals that has dragged on for 16 months.
Oracle Corp. chief executive Larry Ellison fielded questions from financial analysts in July 2003 at company headquarters in Redwood Shores, Calif. Invigorated by a pivotal antitrust victory, Oracle Corp. will attack increasingly vulnerable takeover target PeopleSoft Inc. again in a court battle set to begin tomorrow.
The face-off has been peppered with snide exchanges between Oracle CEO Larry Ellison and his former subordinate, PeopleSoft CEO Craig Conway, who was fired Friday. Both executives are on the witness list for the trial.
Oracle's court papers indicate the company plans to depict PeopleSoft's eight-member board as an irresponsible, clubby clique dominated by the irascible Conway.
PeopleSoft's pretrial briefs draw a much different picture, describing a dedicated, evenhanded board that worked closely with independent financial advisers to protect the Pleasanton, Calif.-based company against a bid designed to destroy its business.
The Delaware trial isn't expected to have a significant effect on the takeover attempt unless Oracle wins the case — an unlikely outcome, based on recent case history that has generally preserved the right of corporate boards to resist unsolicited suitors.
"The courts are reluctant to intervene unless a board has taken specific steps to entrench management in a manner that does not reflect the best interests of shareholders," said San Francisco attorney John Wilson, who specializes in corporate law.
PeopleSoft's poison pill poses an obstacle because, if triggered, it would issue so many new shares that a takeover of the company would become too expensive.
Losing the trial won't ruin Oracle's takeover hopes, according to industry analysts, because the company still will have the financial clout to raise its offer to a level so attractive that People-
Soft shareholders will demand that the board abandon the poison pill.
For its part, PeopleSoft's board continues to insist that Oracle's all-cash bid of $21 per share is inadequate.
The board believes it needs the poison pill to give it more bargaining power if it decides to negotiate a friendly deal with Oracle, according to PeopleSoft's pretrial brief.
If Strine invalidates the poison pill, "stockholders would be at the mercy of Oracle, which might yet decide to lower the price ... or withdraw its offer altogether," PeopleSoft said.
Oracle gained an advantage over its smaller foe three weeks ago when U.S. District Judge Vaughn Walker concluded a PeopleSoft takeover wouldn't harm customers who buy business applications software — the computer coding that automates a wide range of administrative tasks.
The antitrust ruling deprived PeopleSoft of perhaps its strongest takeover deterrent. Oracle's bid probably would have been doomed if Walker had ruled the other way.
The U.S. Justice Department, which filed an antitrust lawsuit to block Oracle's bid, could still provide PeopleSoft with a reprieve by appealing Walker's decision — a move most lawyers consider improbable.
