PeopleSoft Board Rejects Oracle's Offer
Thursday June 12, 8:35 pm ET
By Lisa Baertlein
PALO ALTO, Calif. (Reuters) - Business software maker PeopleSoft Inc. (NasdaqNM:PSFT - News) on Thursday said its board had unanimously rejected a $5.1 billion hostile takeover bid from Oracle Corp. (NasdaqNM:ORCL - News), and its preferred merger partner, J.D. Edwards & Co., asked a court to stop Oracle's bid.
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Oracle, the No. 2 global software maker, said the legal maneuver from J.D. Edwards had "no merit" and that its executives would take to the road to convince PeopleSoft shareholders to sell the company out from under the directors.
Shares of PeopleSoft meanwhile remained above the offer price of $16 a share made by Oracle last week, leading some analysts to question whether Oracle would sweeten its offer.
PeopleSoft, which was blindsided by the hostile bid as it was preparing a merger with smaller rival J.D. Edwards (NasdaqNM:JDEC - News) that would have vaulted it ahead of Oracle in business application software, dismissed any chance of an Oracle deal.
Regulatory issues "are significant enough that a deal could not get done at any price," PeopleSoft Chief Executive Craig Conway told Reuters. He said Oracle would discontinue PeopleSoft products, a move regulators would not allow.
"From our point of view, this process is at an end," Conway told a conference call later in the day.
Oracle last week sent a shock wave through the technology sector when it bypassed the management of its smaller rival and directly approached PeopleSoft shareholders with its unsolicited all-cash offer -- a move that came just days after PeopleSoft said it planned to buy J.D. Edwards.
J.D. Edwards said it asked a California state court for an injunction to stop Oracle's tender offer. It also asked a Colorado state court to force Oracle to pay it $1.7 billion, the value of the PeopleSoft offer, in damages for allegedly illegally interfering with the deal.
The California court had not set a hearing date.
"We believe that this case has no merit whatsoever," Oracle said in a statement.
Chief Executive Larry Ellison said in a conference call that he would not force PeopleSoft customers to migrate to Oracle. Rather, he said, the company would support PeopleSoft products and offer free Oracle software to those customers who choose to switch.
Jeff Henley, Oracle's Chief Financial Officer, said PeopleSoft technology would improve Oracle's products and that his company would launch presentations for investors in the next few days, with a major swing through the East Coast set for next week.
Conway, who last week called Oracle's approach a "pathetic tactic," told Reuters his rival's offer would face at least six months of U.S. and European anti-trust scrutiny.
"In that period of time, PeopleSoft shareholders would be irreparably harmed because PeopleSoft would essentially be in the freezer," said Conway.
A takeover by Oracle would reduce the current three-way rivalry between market leader SAP AG (XETRA:SAPG.DE - News; SAP.), Oracle and PeopleSoft to a two-horse race, he said.
Pleasanton, California-based PeopleSoft, which makes software applications that automate functions like accounting and purchasing, also said Oracle's bid undervalues PeopleSoft.
PeopleSoft's stock is down just over 10 percent from a year ago, while Oracle's is up about 60 percent.
ORACLE'S BRAVADO
Andrew Gavil, a law professor at Howard University in Washington, D.C. said that if Oracle plans to discontinue PeopleSoft products and migrate customers to its own software, that would raise an "obvious red flag" for anti-trust enforcers.
"It is an unusual display of chutzpah," Gavil said. "Given what they've said publicly, they've provided no reason for the acquisition other than to reduce competition."
U.S. antitrust law requires the government to halt any deal that would "substantially lessen" competition.
"The ultimate question will be: 'Does it substantially lessen competition,"' Gavil said. "On the face of it, it seems like there may be a case for answering the question 'yes."'
To win over antitrust authorities, Gavil said, Oracle would have to argue that it's "in an industry where there is so much robust competition that the disappearance of one competitor is insignificant," Gavil said.
PeopleSoft shares fell 25 cents to $17.37. Oracle rose 6 cents to $13.33, and both were on Nasdaq's most-active list.
(Additional reporting by Peter Kaplan in Washington, Caroline Humer in New York, Peter Henderson in Los Angeles and Judy Crosson in Denver) |
