Oracle has increased its bid for its rival to $9.2 billion, up 14% to $24 a share, and said it will put an end the long-running saga November 19, if it fails to secure tenders for a majority of PeopleSoft’s shares.
We believe that our best and final offer of $24 per share represents a substantial premium on the price at which PeopleSoft shares would trade, but for our offer, Oracle chairman Jeff Henley told analysts.
Oracle noted that the new offer is almost 60% higher than the PeopleSoft asking price on the deal immediately prior to the bid was launched, some 17 months ago. It’s about a 15% premium on PeopleSoft’s Friday closing price.
We believe the premium over the stock’s real value, as opposed our deal value, is the only meaningful benchmark stockholders view as relevant, because our offer will expire, said Henley, putting emphasis on the will.
In response, PeopleSoft advised its stockholders to take no action at this time and said its board of directors will meet to review the amended tender offer and make its recommendation to PeopleSoft stockholders in due course.
Now that US and European regulators have cleared the bid, PeopleSoft board support will be critical to a successful deal. The company has a shareholder rights plan in place, which is triggered if an unsolicited bidder buys more than 20% of PeopleSoft shares.
Oracle has now cleared the last significant regulatory hurdle to our closing the transaction, said Henley. At this point the PeopleSoft board of directors is only obstacle to shareholder consideration of our offer.
Henley told analysts that there are two possible outcomes; either the PeopleSoft board revokes the poison pill, or the Delaware court currently mulling Oracle’s challenge to the plan revokes it. The third outcome, that neither occurs, was not mentioned.
PeopleSoft’s board, which has taken about four days to consider previous Oracle offers before making a recommendation, has rejected bids of $16, $19.50, $21 and $26 per share. It reminded shareholders as much in a statement yesterday.
The question now appears to be whether PeopleSoft’s board has become more receptive to Oracle’s advances in the weeks leading up to and following the firing of outspoken CEO Craig Conway and the subsequent Delaware poison pill trial.
Oracle had sued to get PeopleSoft’s shareholder rights plan overturned, and to overturn the controversial Customer Assurance Program, which grants PeopleSoft buyers big rebates if Oracle acquires then ignores PeopleSoft’s products.
The trial quickly revealed itself to be a negotiating table for PeopleSoft to coyly flutter its eyelids at Oracle and for Oracle to repeatedly talk down PeopleSoft’s share price. Even the judge remarked that the trial had become part business deal.
During the trial, it appeared both that PeopleSoft was becoming less hostile to Oracle, with director Steven Goldby testifying that the board would be open to discussing with Oracle a fast transaction at the right price for shareholders.
Revealed as little more than posturing now, Oracle CEO Larry Ellison and co-president Safra Catz both testified that the company was more inclined to reduce its offer than increase it, perhaps by as much as 20% to 33%.
The $24 per share is not negotiable, Oracle executives said. We certainly want to, not negotiate, but to get a definitive agreement with PeopleSoft, Henley said. They have so far refused to negotiate, irrespective of what they said in the recent trial.
Asked why this so-called best offer is actually lower than previous offers, Oracle CFO Harry You said it was due to the degradation of the PeopleSoft business, as well as other issues like the CAP situation that have come into play.
The bid amounts to $9.2 billion on a fully diluted basis, or $8.8 billion when based on the total outstanding common shares today.
