With Oracle Corp. making its "best and final" tender offer for PeopleSoft Inc. last week, representing a $3-per-share increase over its long-standing $21-per-share offer, the pressure for PeopleSofts board of directors to act is increasing.
While some industry watchers contacted last week speculated that the latest offer represents an end to the 17-month-long, $9.2 billion hostile takeover battle, others said several remote options remain that PeopleSoft could employ to keep the company independent.
"There are other options. There is a potential to take PeopleSoft private, or they may be able to find someone else to invest a large chunk [in PeopleSoft] to make it difficult for Oracle to acquire," said Philip Fersht, an analyst with The Yankee Group, in Boston. "But at the end of the day, they have their price."
Others suggested PeopleSoft could split into two entities: an innovation company that would own PeopleSofts tools and do development and a managed services company that would handle maintenance and support of PeopleSoft applications. In doing so, the wisdom goes, Oracle would be acquiring technology but losing the all-important maintenance stream.
PeopleSofts board has offered shareholders and customers little guidance regarding Oracles latest offer, except to request that no action be taken until its decision is announced. The board does not disclose when it meets, and it has not yet made a decision on the bid, according to company spokesperson Steve Swasey in Pleasanton, Calif.
The board is, however, hinting at which direction it might lean. In an open letter to shareholders posted on PeopleSofts Web site last week, the board reminded stockholders it has unanimously rejected Oracles unsolicited offer four times in the past, including a high bid of $26 per share launched earlier this year. Each time, the board concluded that the offers—the lowest and first offer at $16 per share—undervalued PeopleSoft.
Despite its dozen offer extensions and tender offers yo-yoing over the past year and a half, Oracle now seems resolute. New terms of the amended offer stipulate that unless more than 50 percent of PeopleSofts shareholders tender by Nov. 19, the offer will be withdrawn.
"Well be meeting with PeopleSofts stockholders to explain [our offer]," said Oracle Chairman Jeff Henley during a call with analysts last week. "If they want it, they must tender."
As of Nov. 1, about 5.5 percent of PeopleSofts shareholders have tendered to Oracle.
Oracle, of Redwood Shores, Calif., also stipulated that PeopleSofts board must eliminate both its poison-pill anti-takeover measure and PeopleSofts CAP (Customer Assurance Program). The CAP, which offers refunds of between two and five times customer license fees, and the poison pill that floods the market with PeopleSoft shares in the event of a hostile buyout from Oracle, make the proposed merger prohibitively expensive for Oracle.
Meanwhile, the removal of the poison pill and CAP awaits a ruling from Delaware Chancery Court Judge Leo Strine, who heard Oracles case against PeopleSoft last month. Strines decision is expected by the end of this month.
PeopleSofts board has made some decisions that leave questions regarding its direction. Last month, the board fired CEO Craig Conway, largely thought of as an impediment to the deal with Oracle, and brought back founder David Duffield as CEO, along with several other former executives.