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Last Stand May Be Near for PeopleSoft

November 24, 2004
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Though a majority of PeopleSoft shareholders signaled their support for Oracle Corp.’s $9.2 billion hostile takeover bid in November, the Pleasanton, California, business software maker is insisting on a final showdown on its own terms.

The battle, which has been going on for a year and a half, shifts to PeopleSoft’s annual shareholder meeting in the spring. It could very well mark the end of what has been a long, bitter fight. If Oracle can persuade shareholders to vote in its favor again--this time by supporting Oracle’s alternate slate of nominees for PeopleSoft’s board--it will be able to seize control of the company and consummate the deal.

PeopleSoft is counting on the time between now and the shareholder meeting, which could be as early as March, to convince shareholders that it has a plan that will make the company worth more than Oracle’s $24-per-share offer. As proof of its vigor, PeopleSoft notes that it fired former CEO Craig Conway and replaced him with founder Dave Duffield, and has adopted a plan that will make the company even stronger next year.

It has also added hundreds of new customers, making it even more valuable than the $26-per-share offer Oracle made earlier in the year, the company says. "PeopleSoft is not going to sell PeopleSoft for less than it’s worth," says company director Skip Battle.

PeopleSoft insists that Oracle is the company in need, not the other way around. In an investor presentation, it is telling shareholders, "Absent PeopleSoft, Oracle appears to have no credible applications growth strategy."

But Oracle, with 228.7 million PeopleSoft shares turned over in its favor, is sitting in the catbird seat. It is calling PeopleSoft’s new strategy a risky bet, pointing to PeopleSoft’s less than stellar record after missing the sales and profit targets it set last year. Oracle warned shareholders that PeopleSoft’s stock could drop as low as $13 per share if it dumps its bid.

And Oracle is prepared to walk away. It has said that its $24-per-share offer, which it raised in November from $21 per share, is its "best and final" offer. If it had not received more than 50 percent of PeopleSoft stock by its self-imposed Nov. 19 deadline, it had threatened to abandon the deal. It even hired law firm Latham & Watkins, which helped it clear its regulatory hurdles, to look for other potential acquisition targets.

"Oracle's board deliberated and concluded that the absolute maximum amount we were prepared to pay was $24 a share," Oracle CEO Larry Ellison said in a statement. "Beyond that, there are better uses of our capital, including other acquisitions and repurchasing our own shares. Oracle has been at this for a year and a half, and it is now time to bring this matter to a close."

--Ellen Lee

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