Oracle’s chances of securing the 51% of shares voting in favor of its offer have been looking better, but PeopleSoft stressed that even if shareholders vote Oracle’s way it does not mean the deal will close at $24 per share.
Oracle has put a midnight Friday deadline on its offer. If a simple majority of shares have not been tendered by then, the company says it will drop the bid. Both firms have been lobbying their positions to secure support from big shareholders.
The battle of words started with a Securities and Exchange Commission filing, in which PeopleSoft holder Private Capital Management Inc became the first institutional investor to show its hand, saying it would not tender its shares to Oracle.
PCM, which owns about 9% of PeopleSoft, doubted whether $24 fully reflects the value PeopleSoft shareholders may realize over the intermediate term from PeopleSoft’s continued operation as an independent company.
Oracle shot back with a brief statement from Oracle vice president of corporate communications, Jim Finn: Oracle has learned that Capital Guardian Trust Company on behalf of its client accounts has decided to tender its shares.
Capital Guardian Trust owns about 6% of PeopleSoft. That firm and independent sister companies under the Capital Group umbrella own about 10% of the company, according to reports.
A few hours later, perhaps reflecting how important perception is in this battle, PeopleSoft said in a statement Oracle was mischaracterizing Capital Guardian’s tendering its share as support for the $24 per-share offer.
We have spoken to Capital Guardian…they believe PeopleSoft is worth substantially more than $24 per share, PeopleSoft said. Shareholders may tender their shares for a variety of reasons even if they think $24 is not enough, the firm said.
We’ve talked to shareholders who have said they intend to tender shares but that they don’t agree that $24 is an adequate price, PeopleSoft spokesperson Steve Swasey said. Swasey would not elaborate reasons for that position.
One potential reason could be that some analysts say PeopleSoft’s share price is being propped up by the existence of the Oracle offer, and that if Oracle walks away, billions could be wiped off PeopleSoft’s value.
While Oracle calls its $24 the best and final offer, it has previously referred to a $26 offer as final. As long as Oracle is interested, there’s at least an outside chance it may offer more money, no matter how much Oracle denies it.
PeopleSoft describes the tender offer as an informal straw poll. Tendering does not amount to a binding commitment to sell, executives say. Securing 51% of the vote does not mean that Oracle has won, they say.
If Oracle gets the support it wants and the battle continues into its 18th month, it still has to get rid of PeopleSoft’s poison pill shareholder rights measure, which floods the market with new shares, making a hostile takeover uneconomic.
A Delaware chancery court judge is considering whether to instruct PeopleSoft to dump the pill. If he decides to side with PeopleSoft, Oracle may try to hijack the PeopleSoft board with a proxy battle at the PeopleSoft general meeting next spring.
According to an Associated Press report, the fate of the offer may be decided by merger arbitrageurs, investment firms that bet on the outcome of mergers, which may own 25% or more of PeopleSoft’s shares by Friday.
One arbitrage firm, P Schoenfeld Asset Management, has accused PeopleSoft’s board of directors of not fulfilling their duties to shareholders while predicting a financial nightmare scenario if Oracle does not prevail.
If the Oracle offer fails, we expect massive selling and a loss of market value of $3 billion or more, Peter Schoenfeld said in an open letter to PeopleSoft’s board, which he said appears to have little if any concept of what its fiduciary duties are.
PeopleSoft’s Swasey said: Our board is the model of fiduciary responsibility. They have done and will continue to do what is in the best interest of shareholders.
