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Oracle ups the ante in takeover bid

The Associated Press

SAN FRANCISCO — Oracle Corp. raised its offer for rival PeopleSoft Inc. by nearly 22 percent to about $6.3 billion Wednesday in an aggressive effort to secure a deal that PeopleSoft executives have tried to thwart.

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.

“We’ve received input from a broad range of investors,” Henley said in a conference call with analysts and reporters. “Our revised price represents a great value for PeopleSoft shareholders.”

PeopleSoft said its board of directors would discuss the new offer and make a recommendation “in due course,” but urged shareholders to “take no action at this time.”

“The board concluded that the original offer dramatically undervalues the company based on its financial performance, continued market leadership and significant future opportunities,” the company said.

PeopleSoft stock rose 78 cents Wednesday, or 4.5 percent, to close at $17.93 on the Nasdaq, while Oracle shares rose 7 cents to close at $13.42.

The sweetened bid is the latest salvo in the 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, PeopleSoft and about 3,000 smaller vendors.

As PeopleSoft shareholders prepare to vote on the Oracle bid July 7, the company is turning to some of its largest customers for help. It ran newspaper ads Wednesday in which Toyota Motor and Nextel Communications praise PeopleSoft. The Chicago-based Distributors and Manufacturers’ User Group, which represents 300 manufacturing companies, urged PeopleSoft’s board to reject Oracle’s bid.

PeopleSoft could activate a “poison pill” provision that typically fends off unwelcome suitors by issuing new shares, boosting the cost of the deal.

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 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 software.

Industry analysts say PeopleSoft executives — many of whom defected from Oracle — would bristle under Oracle chairman Larry 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.

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 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.”

It’s unclear how 5,100 PeopleSoft customers would fare in a takeover. Big clients spend hundreds of millions of dollars to install proprietary business software; switching is often a costly morass that consumes organizations’ information technology departments for months.