M&A

PeopleSoft Shuns Oracle’s Bid

A legal thumbs-down on the target's poison-pill defense and a proxy fight may be the last, best hopes for the persistent software suitor.
Craig SchneiderNovember 12, 2004

Persistence might eventually pay off for Oracle in its year-and-a-half-long bid for PeopleSoft, but the deal could come at a high price. That much is clear this week after PeopleSoft rejected Oracle’s latest bid to buy it at $24 a share. The offer was reportedly the “best and final” price.

In the meantime, the tender offer now goes to the shareholders for consideration. Indeed, Oracle’s chief executive, Larry Ellison, has stated that the company would withdraw its offer on Nov. 19 if fewer than 50 percent of PeopleSoft shares had been tendered. If the company’s shareholders tender a majority of its stock, however, the fight for the software maker is expected to continue in the courts.

Currently, Delaware Chancery Court Judge Leo Strine is reportedly scheduled to hold a hearing on November 24 to rule on Oracle’s suit to remove PeopleSoft’s “poison pill” takeover defense, which was in place before Oracle made its first offer some 17 months ago. The poison pill that PeopleSoft has in place would allow the board to flood the market with new shares, effectively making a takeover too expensive to complete.

If Oracle gets a majority of shares tendered and the poison pill is upheld, the company could offer a slate of directors in a proxy fight for control of PeopleSoft’s board at the company’s next annual shareholder meeting in the spring. The reason for the proxy contest would be to replace enough board members so that Oracle could get a fair hearing and get the board to pull the poison pill.

But Greg Taxin, chief executive officer of Glass Lewis & Co., a shareholder advisory service believes that PeopleSoft’s board would do well to sit down with Oracle’s representatives before a proxy fight begins. “I don’t know how you hold a well-financed suitor at bay without bothering to engage in a conversation,” he said.

“I think PeopleSoft’s board would have a much more persuasive position if they met with Oracle, expressed their view and opinion on value, and then came out and told PeopleSoft shareholders that despite their best effort, Oracle refused to offer a fair number,” Taxin added.

A. George Battle, a PeopleSoft director who heads the committee charged with reviewing the offer, said the company “would be willing to discuss an offer made by Oracle at an appropriate price – but $24 isn’t it,” according to a New York Times article. He added, PeopleSoft was worth “materially more now than it was in February when Oracle made its inadequate $26 offer.”