Poison Pill

By Lisa Vaas  |  Posted 2004-10-05 Print this article Print

Tom Burnett, president of Merger Insight, an affiliate of the New York research and brokerage firm Wall Street Access, said his firm was encouraged by PeopleSofts new willingness to negotiate. All thats left between Oracle and the finish line is for the Redwood Shores, Calif., database giant to get the European Unions go-ahead on the merger and to improve its negotiating leverage by moving the poison pill and Customer Assurance plan out of the way. "They have to wrestle with that," Burnett said. "Thats willingly entered into by PeopleSoft and its customers. I doubt a judge will be willing to just rip that up."
The Customer Assurance plan and the poison pill are both programs that guarantee customers a generous refund—for two to five times the money they spent on PeopleSoft products—if Oracle were to fail to support PeopleSoft products after buying the company. Oracle has brought PeopleSoft to court in Delaware in an attempt to strike down the plans, which are estimated to carry about $2 billion in potential liability for Oracle.
Can PeopleSofts middleware-integration deal with IBM help stall an Oracle takeover? Click here for analysts insight. William Lawlor, a partner in the Philadelphia law firm of Dechert LLP who leads the firms mergers and acquisitions group, said that—based on case law and the fact that Oracle could run a proxy battle and force redemption of the bill—its a good bet that the Delaware court wont force a redemption of the poison pill. The Customer Assurance plan is another matter entirely, Lawlor said, since its a novel provision that could well stand in the way of a takeover. "While there might have been some customer concern that Oracle will pull licenses and upkeep away, PeopleSoft might have been encouraging that concern, and given the numbers at play here, this would really get in the way of a tender offer," he said. "If I had to bet on it, the court is really going to look hard at that one. Id be surprised if that stays up." In the meantime, some are saying PeopleSoft is stuck between a rock and a hard place. Its situation hasnt been made easier by the fact that several investment banks, including Marlin & Associates and Morgan Stanley, have said PeopleSoft should trade between $13 and $16 per share in the absence of a hostile takeover. Oracle is offering $21 per share—a tantalizing bonus. "Whichever set of numbers you look at, it would be less than what PeopleSoft is now trading at," Marlin said. "It puts pressure on the board, and on management." Given that, theres no need for Oracle to raise its offering price for Pleasanton, Calif.-based PeopleSoft, Marlin said. "For the sake of getting a deal and removing the poison pill and the customer rebate program, perhaps theyll be willing to raise it a little, but we would not suspect a significant [increase]." On the other hand, if PeopleSoft does not sit down and cooperate soon, as Goldby suggested the company was prepared to do, Oracle could well lower its offering price, Marlin said—as it has done in the past. Check out eWEEK.coms Database Center at http://database.eweek.com for the latest database news, reviews and analysis.

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Lisa Vaas is News Editor/Operations for eWEEK.com and also serves as editor of the Database topic center. Since 1995, she has also been a Webcast news show anchorperson and a reporter covering the IT industry. She has focused on customer relationship management technology, IT salaries and careers, effects of the H1-B visa on the technology workforce, wireless technology, security, and, most recently, databases and the technologies that touch upon them. Her articles have appeared in eWEEK's print edition, on eWEEK.com, and in the startup IT magazine PC Connection. Prior to becoming a journalist, Vaas experienced an array of eye-opening careers, including driving a cab in Boston, photographing cranky babies in shopping malls, selling cameras, typography and computer training. She stopped a hair short of finishing an M.A. in English at the University of Massachusetts in Boston. She earned a B.S. in Communications from Emerson College. She runs two open-mic reading series in Boston and currently keeps bees in her home in Mashpee, Mass.

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