The merger battle, in its 17th month, is now likely to move back to the courtroom, where Oracle will try to remove the last barriers to the deal going ahead. Unless successful in court, the next step may be a proxy battle for control of PeopleSoft’s board.
We believe it is time to bring this matter to a close, for the good of PeopleSoft’s shareholders, customers, and employees, Oracle said in a letter to PeopleSoft. We are prepared to complete and pay for the acquisition of all outstanding shares of PeopleSoft upon satisfaction of the remaining conditions, which are all in your control.
The remaining conditions include revocation of PeopleSoft’s shareholder rights plan, the so-called poison pill anti-takeover measure that floods the markets with new shares if a hostile bidder acquires more than a certain percentage of the company.
We also request a meeting to finalize a definitive merger agreement at $24.00 per share with the goal of announcing a deal prior to market open on Monday, November 22, 2004, Oracle said in its letter.
PeopleSoft issued a statement Saturday morning that unanimously reaffirmed its previous conclusion that Oracle’s latest offer is inadequate and that the Company is worth substantially more than the $24 per share offered by Oracle.
Skip Battle, chairman of PeopleSoft’s Transaction Committee of independent directors, said conversations with shareholders led the board to believe the majority of stockholders agree that Oracle’s $24 offer is inadequate and does not reflect PeopleSoft’s real value.
He said in a statement: This majority is comprised of stockholders who did not tender their shares, as well as stockholders who tendered but told us that they believe PeopleSoft is worth more than $24 per share.
PeopleSoft’s board of directors will now proceed based on what it claims it has been hearing from shareholders – that $24 per share is too low that there are many reasons why a shareholder would choose to tender.
One such reason could be that some shareholders are scared that what some analysts said – that PeopleSoft’s share price could dive as much as 30% in the absence of an Oracle offer, as merger speculators dump the stock – could turn out to be true.
By that logic, keeping the Oracle offer alive means keeping PeopleSoft’s share price up while PeopleSoft’s new management set about proving that their new aggressive 2005 financial targets are more than hot air.
Oracle made it clear recently that the time for negotiation is over. The company has already sent PeopleSoft’s lawyers a draft merger agreement for consideration, but it seems unlikely that PeopleSoft will be receptive.
Assuming that PeopleSoft refuses Oracle’s terms, the next step is for Oracle to present the results of the tender offer to the Delaware Chancery Court, which is currently mulling Oracle’s demand that the poison pill be overturned.
PeopleSoft appears confident the court will toss Oracle’s claims, and that Oracle’s last hope to overturn the poison pill will be to stuff the PeopleSoft board with supporters of its position, via a proxy contest.
Oracle was gearing up for such a battle early this year, but withdrew its slate of candidates at the last minute when the US Department of Justice launched its ultimately unsuccessful attempt to block the merger on antitrust grounds.
Its nominees then were: Duke Bristow of UCLA Anderson School of Management; Richard Clemmer, former CEO of PurchasePro.com Inc; Roger Noall, formerly of KeyCorp; Laurence Paul of Laurel Crown Partners LLC; and Artur Raviv of Kellog Graduate School of Management.
Oracle says its $24 offer is fully valued and clearly fair, representing a substantial premium to PeopleSoft’s true historical trading multiples. The company believes PeopleSoft has been artificially overpriced since the takeover bid was launched.
Both companies claim that the other stands to benefit more from the deal. PeopleSoft points to declining prospects for Oracle’s applications business, while Oracle has similar claims to make about PeopleSoft’s sales.
In addition to the Delaware case, PeopleSoft has sued Oracle in Oakland, California, for over $1bn, for what it says are Oracle’s unfair business practices, including a deliberate campaign to mislead PeopleSoft’s customers and disrupt its business.
PeopleSoft’s position since the beginning has been that Oracle’s offer is more about damaging PeopleSoft than it is a serious intent to acquire. The Oakland case will go to trial on January 10, PeopleSoft said.
