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Oracle Raises Offer in Bid for PeopleSoft

June 2003

Oracle Raises Offer in Bid for PeopleSoft

Oracle Raises Offer to $6.3 Billion in Hostile Takeover Bid for Rival Software Maker PeopleSoft

The Associated Press

SAN FRANCISCO June 18

Oracle Corp. increased its offer Wednesday for rival business software maker PeopleSoft Inc. by nearly 22 percent to about $6.3 billion in an aggressive effort to push investors to approve a deal that PeopleSoft executives have tried to thwart.

Oracle's sweetened offer is the latest salvo in increasingly bitter competition in the business software niche, which builds computer programs to run giant databases so corporate clients can store customers' credit card and other personal information, process transactions online, or compile personnel data on internal Web sites.

 

Germany's SAP AG dominates the market, followed by Oracle and PeopleSoft and about 3,000 smaller vendors.

Oracle chief financial officer Jeff Henley said management decided to increase its cash offer to $19.50 a share from $16 a share after meetings this week with PeopleSoft's largest shareholders. Henley emphasized that Oracle was "absolutely committed" to the takeover attempt.

"We've received input from a broad range of investors," Henley said in a telephone conference call with analysts and reporters on Wednesday. "Our revised price represents a great value for PeopleSoft shareholders."

Oracle's new offer represents a 13.7 percent premium on PeopleSoft's closing share price Tuesday. Oracle's original offer represented a premium of about 6 percent.

A PeopleSoft spokesman said the company had no immediate comment but expected to issue a statement later in the day.

PeopleSoft shares were up 98 cents, or 5.7 percent, to $18.13 in midday trading on the Nasdaq Stock Market while Oracle shares rose 11 cents to $13.46.

As PeopleSoft shareholders prepare to vote on the Oracle bid July 7, the company is turning to some of its largest customers for help, running newspaper ads Wednesday in which Toyota Motor and Nextel Communications praise PeopleSoft.

But Henley said Wednesday that recent conversations with several prominent PeopleSoft customers resulted in pledges of support for the takeover and for Oracle's products.

The biggest impediment to a takeover is a "poison pill" provision PeopleSoft's management could activate. Considered an extreme measure, the anti-takeover defense typically fends off unwelcome suitors by issuing new shares that boost the cost of the deal.

"We've urged shareholders to get the (PeopleSoft) board to face up to the reality that they need to get rid of this pill," Henley said.

Consolidation in the fragmented industry is "long overdue," Henley said.

Ken Marlin, managing director at New York-based media and technology investment bank Marlin & Associates, said Oracle's latest offer is "quite fair."

"This reaffirms what (Oracle chairman) Larry Ellison has been saying for quite some time that his offer is serious," Marlin said. "This offer absolutely makes sense. He had to start his bidding someplace, and from the beginning he was willing to negotiate. The Peoplesoft board of directors now needs to negotiate in good faith."

Pleasanton-based PeopleSoft announced a plan June 2 to acquire Denver-based J.D. Edwards & Co. in a stock swap valued at $1.7 billion.

Oracle, based in Redwood Shores, launched its takeover bid four days later, offering $5.1 billion, or $16 per share, to buy PeopleSoft without J.D. Edwards.

PeopleSoft executives said joining with Oracle would be difficult, if not impossible, because regulators would raise too many questions about how the deal would affect competition in the $20 billion market for business applications software.

Industry analysts say PeopleSoft executives many of whom defected from Oracle would bristle under Ellison. Oracle and PeopleSoft have long had an acrimonious relationship, marked by sniping between Ellison and PeopleSoft chief executive Craig Conway, who worked under Ellison from 1985 to 1993.

Last week, Conway likened Ellison to a bully "who picks a fight in a school yard knowing people will gather and watch."

PeopleSoft filed a lawsuit in state court alleging the bid is a "sham" offer designed to destroy the company. J.D. Edwards also sued Oracle, seeking $1.7 billion, plus unspecified punitive damages, for trying to interfere with its PeopleSoft deal. Oracle said the suit is "frivolous."

Oracle said Wednesday it plans to sue PeopleSoft, its board of directors and J.D. Edwards in Delaware in response to "their collective efforts to eliminate PeopleSoft shareholders' ability to accept Oracle's tender offer."

Henley emphasized in the telephone conference that the Oracle acquisition would turn around the struggling PeopleSoft and generate cash for Oracle within a single quarter. He emphasized that Oracle would not eliminate the PeopleSoft brand, but that Oracle would not likely offer PeopleSoft products to new clients.

"We intend to support these products for a long time," Henley said. He also noted that PeopleSoft's consulting projects would "naturally wind down" over the next nine to 12 months but that Oracle would "support existing projects."

 

Copyright 2003 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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