Quixotic Hope for PeopleSoft Springs Eternal

By Lisa Vaas  |  Posted 2004-11-09

Quixotic Hope for PeopleSoft Springs Eternal

Yes, OK, OK, OK, its true. An Oracle lawyer did, in fact, tell the judge in the Delaware anti-poison-pill trial that Oracle would walk away from its 18-month-old, bitterly fought PeopleSoft bid if shareholders dont tender a majority of outstanding shares by Nov. 19.

In a letter to the court, Michael Carroll said Oracle would give up its fight to invalidate both the poison pill and the special customer-protection program that PeopleSoft has been using to fend off the takeover, should it fail to garner the shareholder backing it needs.

That backing is essential in Oracles quest to launch a proxy battle in the spring, during which the company would attempt to take over PeopleSofts board, install sympathetic directors and vote down the poison pill and customer-assurance plan.

I know there are lots of people who would love to see Oracle fail in its takeover bid. The resistance is completely understandable. Larry Ellison is a tough, arrogant, insert-unpublishable-word-here, and that toughness filters down to every level of his company, whether it be Oracles infamous sales reps or its top-level executives.

The culture gap between the two companies couldnt be wider. As experts often point out, the grueling integration of the two companies following a successful takeover would make this 18-month-old legal saga look like a walk in the park in comparison.

But dont let fear and dread cloud your perceptions of reality. What Carroll wrote to Judge Strine is completely in line with what Oracle has been asserting since it made its "best and last" offer of $24 per share. As mergers and acquisitions experts point out, it only makes sense for Oracle to give up on the efforts to dismantle the anti-takeover provisions if it cant get the backing it needs to win the proxy battle.

"Theyve made this Nov. 19 date sort of a pre-referendum on the deal," said Bill Lawlor, an attorney with Dechert LLP, in Philadelphia. "Its not very dramatic for them to say theyd walk away from the litigation if they dont get 50 percent of the shares. Theyd be a loser anyway, and they wouldnt win in next springs proxy contest."

The purpose of providing the referendum now is simply to demonstrate to the judge, before he delivers his opinion, that the anti-takeover provisions really do stand between Oracles bid and the shareholders, Lawlor told me. If Oracle cant win over the shareholders, the existence of the poison pill becomes academic.

Whats relevant now is whether PeopleSoft shareholders will in fact tender their shares. As of Oracles most recent news release, at the end of October, 20,191,181 shares had been tendered. According to PeopleSoft, that represents 5.5 percent of shares.

Next Page: Nobody tenders shares early.

Tendering Shares

Now, that number may appear trivial at first blush, but lets not get all Democratic, blue-state, sunny-exit-polls, early-election-returns happy-slappy here. Tendering shares is a hassle. Nobody tenders shares until the last possible minute.

"More people keep them nearby," said Tom Burnett, president of Merger Insight, an affiliate of Wall Street Access, in New York. "They dont want to go through the trouble of withdrawing" them, he said.

Not only is it a hassle and easy to procrastinate about, but it just makes plain good sense to wait out the ups and downs of news headlines. "They tend to wait until the last day or so, just in case news comes out," Burnett said. News that could impact shareholders decisions include judges rulings, IBMs unlikely-but-still-possible role as white knight, disappointing quarterly returns from PeopleSoft, etc.

The thing to bear in mind is that shareholders have absolutely nothing to lose if they tender their shares. Even if they want a higher bid, theyll tender as of Nov. 19. Why? Because shareholders dont lose their shares if they tender. They can always withdraw the tendered shares after the Nov. 19 deadline. Because they know that Nov. 19 is their last chance to tender, and because they know that there will be additional negotiations following the tender, they will tender.

"I would be surprised if they dont get the majority vote," Lawlor said. "They should get a fairly substantial majority tendered in. Its a no-lose proposition for the shareholders."

They will tender. Like it or not, Oracle will win this battle. PeopleSofts Dave Duffield will put out his plans for PeopleSoft on Nov. 15—and in them you can bet that there will be a rejection of Oracles bid—but mark my words, shareholders will tender.

Write to me at lisa_vaas@ziffdavis.com.

eWEEK.com Associate Editor Lisa Vaas has written about enterprise applications since 1997.

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