Despite its suitors announcement that shareholders had tendered more than 60 percent of outstanding shares of PeopleSoft Inc., the beleaguered companys board of directors recently unanimously voted to reject Oracle Corp.s latest $24-per-share buyout bid on the grounds that it is "inadequate."
After convening on the morning of Nov. 20, following Oracles late-night announcement, the PeopleSoft board "unanimously reaffirmed its previous conclusion that Oracles latest offer is inadequate and that the company is worth substantially more than the $24 per share offered by Oracle." As of press time last week, the board was standing firm on its belief that the companys business plan creates superior value for stockholders.
Oracle had announced that it received tender offers for a majority of PeopleSoft shares and called on PeopleSofts board to meet with Oracle officials for talks aimed at reaching a definitive merger agreement before the market opened the following Monday.
However, that Monday, following PeopleSofts response, Oracle fired off a second letter to the companys board. In it, Jeff Henley, chairman of Oracles board of directors, wrote that Oracle still believes the "fair price" for PeopleSoft remains $21 per share and that Oracle doesnt understand how PeopleSoft reached the conclusion that the Pleasanton, Calif., software maker was worth more than the offered $24 per share.
Henley also wrote that PeopleSofts new fiscal year 2005 guidance is "simply not credible."
In that guidance, the PeopleSoft board noted that it expected "substantial" sequential sales and revenue growth for the 2004 fourth quarter. The company also projected total revenue of $700 million to $715 million, with software-license revenue of $175 million to $185 million. The company contended this momentum will continue into next year.
"Based on numerous conversations we have had with our largest stockholders over the past 10 days, the board believes that a majority of our stockholders agree that the Oracle $24 offer is inadequate and does not reflect PeopleSofts real value," said A. George Battle, chairman of the Transaction Committee on PeopleSofts board, in a statement.
But in his letter last Monday, Henley asserted, "Just as your FY 2004 guidance was manufactured as a basis to oppose our previous offers—and was, in fact, not achieved—your new guidance is equally not credible and appears to be little more than an attempt to justify opposing our current offer. If one looks at independent consensus 2005 earnings estimates for PeopleSoft, $24 per share reflects a very generous premium relative to true earnings multiples."
Nevertheless, the PeopleSoft board decision ensures that the nearly 18-month buyout battle will continue in the courts as well as in the boardrooms of both companies. Oracle will likely return to Delaware Chancery Court to argue for the removal of a "poison pill" shareholder-rights provision that would flood the market with millions of additional shares in an attempt to block the hostile buyout offer.
Company spokesperson Steve Swasey declined to comment on whether the board decision means PeopleSoft is about to invoke the poison pill bill. The company would have nothing more to say beyond what was stated in its press release, Swasey said. Any other statements would be "speculative."
John Pallatto is Enterprise Applications Topic Center editor at eWEEK.com. Lisa Vaas, associate editor at eWEEK.com, contributed to this story.