Its been easy to scorn Oracles grubby cash tender offer of $19.50 per share for outstanding PeopleSoft shares. After all, PeopleSofts stock has been trading above that for some time.
And its not only the insultingly low-ball offer thats made PeopleSoft customers and executives seethe at the deeply resented bid. PeopleSoft and its fans get prickly at the idea of being eaten alive by a company whose collective personality has about as much soul as the Borg. Remember the Borg? Star Trek, Next Generation? “You-will-be-assimilated.” I can imagine PeopleSoft CEO Craig Conway going to bed every night whispering, “Assimilate this, grid-scum!”
But with yesterdays announcement that Oracle had finally sweetened the deal by pushing its offer up to $26 per share, or about $9.4 billion, the game suddenly got serious. Compared with Oracles original, stingy bid, the amended offer is enticing, as it entails a healthy 18.8 percent premium over PeopleSofts closing price of $21.89 as of Tuesday.
Ken Marlin, for one, managing partner of the New York-based mergers and acquisitions investment bank Marlin & Associates, was gleeful at the new $26-per-share offer. He said that it puts a “fair amount of pressure” on PeopleSoft to step up to their fiduciary responsibility—note that “F.R.” term; it comes up quite a lot—to their shareholders. “Its pretty hard to ignore that $2 billion increase over the previous offer,” he said.
Still, investors remained cautious. PeopleSoft shares closed at $22.70, more than $3 below Oracles new price. Oracles price dipped as well, selling for $13.27, or down 64 cents. All that tentativeness is a sign that investors are holding their collective breath pending outcomes of antitrust investigations by the DoJ, the European Commission and more than half the States Attorneys General.
For its part, the DoJ has been investigating the deal since June, when Oracle first announced its tender offer. The department also made a second request for information in the fall—a move that anti-Oracle optimists like to label as a red flag but which experts familiar with antitrust issues deem par for the course when youre talking about a deal of this magnitude.
But come on, lets face it. Barring a DoJ decision that an Oracle-PeopleSoft merger would constitute antitrust violations, the deal is a no-brainer at this point. The PeopleSoft board simply cant keep Oracle at arms length when they have such a compelling deal on the table. As uncomfortable as it feels to agree with the Borg, you have to admit that Oracle VP Chuck Phillips and Ellison have been right on the money as theyve said, repeatedly over the months since the bid was first launched, that PeopleSofts boards fiduciary obligation is not to PeopleSoft management, but to its shareholders. If the board continues to turn its face and hope that Oracle goes away, they run the risk of losing shareholders billions of dollars.
And you have to admit, Oracles timing is pretty darn precious. It comes right on the heels of PeopleSoft having announced that the board meeting is being moved up, to March 25. It puts pressure-cooker pressure on PeopleSoft board members to seriously consider the offer. Should they decline to take it up, as Marlin pointed out to me, they run two potentially lethal risks.
The first risk is that shareholders might vote in favor of Oracles slate of directors. This isnt difficult to envision, since the people Oracles putting forth are recognized as independent thinkers, not Oracle lackeys. The second risk the PeopleSoft board runs is that if they decline to negotiate, Oracle might throw in the towel on the deal. Granted, Oracle giving up isnt that easy to visualize, but were it to happen, it could cause the stock price to drop, which would then mean that shareholders lost out on some $2 billion.
Will we be looking at a combined Oracle-PeopleSoft soon? An OracleSoft? A Porcle? At this point, it looks likely. Oracle just has to beware the Ides of March and the Ire of the DoJ.
What could possibly cause PeopleSofts board to turn away from a $26/share bid? If you have clues regarding what the outcome of the March Madness will be, whether its PeopleSofts board meeting or the DoJs investigation, Im all ears. Write me at lisa_vaas@comcast.net.
eWEEK.com Database Center Editor Lisa Vaas has written about enterprise applications since 1997.
