New Oracle Bid Spurs 2nd Look

Oracle's announcement that it is increasing its bid for PeopleSoft is prompting some investors to look seriously at the offer for the first time.

Oracle Corp.s announcement last week that it was increasing its bid for competitor PeopleSoft Inc. by 33 percent, to $9.4 billion, is prompting some investors to look seriously at the offer for the first time. Enterprise customers of both companies software also are now wondering about the likelihood and impact of the deal going through.

Oracle announced it would pay PeopleSoft shareholders $26 per share, a sum that was $6.50 more than the company previously offered and the first time Oracle offered more than what the stock was trading for on the open market. The deal was originally tendered last June.

"It is definitely a credible offer that PeopleSoft has an obligation to evaluate in a serious fashion," said Cynthia Richson, corporate governance officer at Ohio Public Employees Retirement System, in Columbus. "When [the offer] hits $26 per share, the board has a fiduciary duty to see if its in shareholder interest."

A retirement investment agency, OPERS owns about 544,000 PeopleSoft shares and more than 7 million Oracle shares.

PeopleSofts board originally argued that Oracles offers undervalued the company and twice urged shareholders to reject the bids. However, the Pleasanton, Calif., companys directors did not immediately reject the latest offer, saying in a statement they would "make [a] recommendation to PeopleSoft stockholders in due course."

The Road Ahead

  • Feb. 10 PeopleSoft stockholders can begin voting on the makeup of the companys board
  • March 12 Oracle tender offer expires
  • March 12 DOJ decision expected
  • March 25 PeopleSoft shareholder meeting, where ballots will be counted

At the same time, an Oracle-led proxy battle for control of PeopleSofts board grew more intense. Oracle, of Redwood Shores, Calif., late last month announced plans to nominate a slate of four people for the board and said it is seeking to change PeopleSofts bylaws to include a fifth nominee. The latter move is aimed at replacing PeopleSoft board member Michael Maples, who came to the board as a director of J.D. Edwards & Co., which PeopleSoft acquired last year.

In response, PeopleSoft announced last week that it will hold the required election of board members March 25, months earlier than previously expected. As a result, shareholders will be able to cast their votes by mail as soon as this week.

"We hope that PeopleSoft stands firm and that their board sees it that way as well," said Ola Faucher, president of the Higher Education User Group, in Washington, which represents about 640 higher-education institutions worldwide. The group does not want to see Oracle take over PeopleSoft, which has a significant number of higher-education customers, under any circumstances.

"Such a change would [have] a significant fiscal impact [on] all the higher-education customers [within HEUG] who have invested resources, time and money into PeopleSoft," Faucher said.

Next page: Oracles fight for survival.