Oracle Extends $220M Tender Offer for Portal Software

With some Portal Software shareholders kicking up dust over an acquisition offer from Oracle they believe to be unfair, Oracle announced June 7 that it would extend its $220 million offer for Portal.

Oracle has set the new deadline for shareholders to tender their holdings to June 20, at 12:00 a.m. Eastern Standard Time.

The previous tender offer, itself extended from May 22, was set to expire June 6 at midnight. At that time, about 23.2 million of Portal Software shares, or close to 50 percent, had been tendered to Oracle—not nearly the 90 percent of outstanding shares the company needs to successfully complete the transaction.

As of June 7, 23.2 million shares have been tendered to Oracle—about 53 percent of Portal Softwares outstanding stock, Oracle officials said.

Oracle needs about 24.675 million tendered shares for the deal to proceed. Officials declined to comment further on the Portal Software deal.

Oracle initially announced its intent to acquire Portal Software, which develops billing and revenue management software for the communications industry, on April 12.

Click here to read about Oracles acquisition of Demantra.

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However, the relatively listless response from shareholders has forced the company to extend its offer twice—and possibly rethink its strategy if more shareholders are not forthcoming.

Joshua Horowitz, director of research at Berggruen Holdings of New York, which owns 9.1 percent of Portal Software, is leading an insurgency of sorts.

On May 24, Horowitz sent a letter to Portal president and CEO David LaBuda requesting that the company not sell itself at a "fire sale price."

"As we have stated repeatedly, we insist that one alternative you consider be a structure whereby Portals operating business is sold ... for its true intrinsic value, with shareholders retaining the corporate entity," wrote Horowitz.

Horowitz also requested a fair and open sales process.

"The price is unfair and the process is unfair," Horowitz told eWEEK on June 7. "The company should have filed its financial transactions, gotten its house in order, then explored a transaction."

Berggruen, Portals largest independent shareholder, is concerned that Portals financials are not transparent to shareholders—the company was de-listed from Nasdaq in June 2005 and doesnt list official financial documents—which means shareholders are not able to assess a fair market value for the company.

Berggruen also believes the company is worth more than the $4.90 a share that Oracle has offered; Horowitzs estimate is closer to $6.75 to $12.98 a share, despite the fact that Portal Softwares stock has been trading between $2 and close to $5 between April 2005 and April 2006, according to Securities and Exchange Commission documents.

Horowitz pointed out that just because a company trades at a certain price, it doesnt mean thats its full value.

"[Portal Software] doesnt have financials ... so when its in that realm, in the badlands, there is a chance to be mis-priced and clearly someone took advantage of that that, i.e. Oracle, by offering less," said Horowitz.

"They are paying less than 1x revenue; I urge you to find something in the software industry that trades [at that level]."

In its most recent shareholder presentation, Portal Software executives said there were, in fact, three written final-round offers that topped the $5 per share mark (between $5 and $5.05 a share to be precise).

Read more here about Oracles expansion in the database market.

Oracle itself initially offered $5 a share, but lowered its bid to $4.90 based on what it learned during the final diligence and negotiations, according to SEC filings.

Portal went with Oracle rather than the higher bidders for a couple of reasons: A deal with Oracle required less negotiation and provided the most certainty to close; it required less due diligence; and it provided the fastest path to closing.

Berggruens Horowitz responded to Portal Softwares shareholder presentation with another letter, writing that it was "just another attempt to frighten and coerce stockholders."

Portal Software executives, who have led the company astray in recent years, stand to profit enormously from the Oracle deal.

According to a May 24 article in the San Jose Mercury News, Portal Software co-founder and director John Little (who stepped down as the companys CEO in 2004) would receive $32.4 million in stock should Oracles acquisition go through.

Co-founder Dave Labuda would receive $7.9 million for his Portal Software shares—on top of the $53.4 million hes sold since 1999.

The company expects to post continued losses in the coming quarters, which will result in a "declining cash position," according to SEC documents.

As of June 7, of the 53.9 percent of the shares tendered to Oracle, 24 percent came from Portal executives and directors.

"There are 26 million shareholders that have said no to this deal," said Horowitz. "There are some pretty intelligent people that have decided not to tender. Its quite unusual but it speaks to the deal on the table."

Portal Software officials were not available at press time.

Editors Note: This story was updated to include comments from a Portal Software shareholder.

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