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Oracle raises PeopleSoft offer

February 2004

Oracle raises PeopleSoft offer

By Jessica Guynn

Wed, Feb. 04, 2004

Who wants to buy PeopleSoft Inc.?

Oracle Corp., locked in a bitter contest for its rival software maker, made its intent absolutely clear to Wall Street on Wednesday when it raised the stakes by boosting its hostile takeover bid -- for the second time in eight months -- to $26 a share, a 33 percent increase from its previous offer and above PeopleSoft's recent high of $24.04.

"This is our final price," Jeff Henley, Oracle's chairman and chief financial officer, said.

But the $9.4 billion offer generated relatively little excitement among investors because the final answer on PeopleSoft's fate rests not with Oracle but with the Justice Department, which in the next month is expected to complete its antitrust investigation of the proposed deal. It is unclear whether the Justice Department will approve or block the deal or impose conditions.

"The Justice Department really doesn't care about these corporate maneuverings," said Chicago antitrust lawyer Hillard Sterling.

PeopleSoft, whose shares rose 93 cents or 4 percent Wednesday to close at $22.82, advised shareholders to take no action until its board has reviewed the offer. Oracle shares closed down nearly 5 percent to $13.27.

"The board of directors, consistent with its fiduciary duties, will meet to review and discuss Oracle's revised tender offer and will make its recommendation to PeopleSoft shareholders in due course," said company spokesman Steve Swasey. He declined further comment.

PeopleSoft has repeatedly spurned Oracle's advances, saying the proposed deal faces substantial antitrust hurdles and that Oracle has not offered a fair price for PeopleSoft. Oracle launched the surprise hostile takeover in June, offering first $16 a share for PeopleSoft, then sweetening the offer to $19.50 a share after analysts and investors said the bid was too low.

Oracle's latest offer -- 62 percent higher than its first -- appears to be prompted by PeopleSoft's decision last week to move up its annual shareholder meeting by two months to March 25. At the meeting, shareholders will vote on the companies' competing slates for PeopleSoft's board of directors. Last month Oracle announced it would ask shareholders to replace four of PeopleSoft's board members and add a fifth. If Oracle won a majority on PeopleSoft's board, it could remove PeopleSoft's antitakeover measures and negotiate a friendly merger.

"We believe our offer presents compelling value to PeopleSoft stockholders," Henley said. "We urge PeopleSoft directors to seriously consider our offer and put the interests of their stockholders first."

The timing of the offer surprised some analysts, who for months had speculated that Oracle would raise its offer in a chessboard move designed to wrest control of PeopleSoft. PeopleSoft's stock has traded above Oracle's last offer of $19.50 a share since October. Oracle had indicated that it would not raise its offer until United States and European regulators completed their review of the proposed deal.

"We think it's very significant in that it is a $2 billion increase over the last offer," said Ken Marlin, general partner at New York-based Marlin & Associations, a technology banking and investment firm. "We think PeopleSoft is going to have to take it seriously."

David Hilal, an analyst Friedman Billings Ramsey who does not own shares of either company, said PeopleSoft shareholders are seriously considering Oracle's "final" offer for the first time. As of the close of business on Feb. 3, Oracle had rounded up approximately 10.6 million PeopleSoft shares, about 3 percent.

"I don't think the shareholders are an obstacle anymore," said Hilal, whose firm does not have banking business with either company. "The (Justice Department) is the wild card."

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