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.”
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.
But Oracle is fighting for survival, according to CEO Larry Ellison, who addressed the topic at Oracles AppsWorld user conference late last month. Ellison said he sees three main competitors in the enterprise resource planning sector going forward: SAP AG, Microsoft Corp. and Oracle.
SAP, of Walldorf, Germany, is the No. 1 e-business applications provider, larger than a combined PeopleSoft and Oracle would be. Microsoft is widely seen as an increasing threat, although it currently offers enterprise applications only for small and midsize businesses.
Should the buyout bid succeed, Tim Gorman, president of the Rocky Mountain Oracle Users Group, in Denver, said it is not difficult to predict PeopleSofts fate.
“In essence, PeopleSoft will just disappear. Thats my feeling,” said Gorman, a principal at SageLogix Inc., also in Denver.
Although Gorman said he considers PeopleSofts technology more sophisticated than Oracles, he does not foresee any shift in direction by Oracle to accommodate components of PeopleSoft software.
“Without its suite of applications, [Oracle] wouldve fallen by the wayside [like] Sybase [Inc.] and Informix [Software Inc.] have. Oracle as a company knows that the future lies with business solutions through its applications.”
Oracle has said it expects the Department of Justice to wrap up its antitrust investigation into the proposed acquisition by March 12. The DOJ, however, would not confirm that. The European Commission and more than half the U.S. states attorneys general are likewise in the midst of antitrust investigations into the proposed buyout.
OPERS Richson said that her organization has not determined how it will vote on the deal but that the DOJs decision will play a big role in OPERS decision, since she expects Oracle to fight a negative recommendation from the DOJ.
“Being involved in a long, drawn-out legal battle is not good for any company, and we would certainly take that in as a factor,” Richson said.