Oracle Decreases Credit Line

Oracle sets the stage for its takeover of PeopleSoft.

Confident it has a firm grasp on the resources necessary to execute the $7.5 billion hostile takeover bid for PeopleSoft Inc., Oracle Corp. decided two weeks ago to lower the amount of its credit line from $5 billion to $1.5 billion.

A document filed with the Securities and Exchange Commission by Oracle, based in Redwood Shores, Calif., shows the database developer has negotiated a 364-day, $1.5 billion line of credit with Credit Suisse First Boston, ABN AMRO Bank NV and other syndicated lenders in the bid for PeopleSoft. The move effectively replaces a prior $5 billion credit line agreement Oracle had in tow when it announced its purchase intentions on June 6, 2003.

Oracle lowered its credit amount with investment bankers because it has enough money on its balance sheet, according to an Oracle official. In addition, the official said the PeopleSoft tender offer remains fully funded and will not fall under any type of financing conditions.

Takeover timeline

  • Dec. 30, 2003 Drops credit line from $5 billion to $1.5 billion
  • Dec. 19, 2003 Extends purchase deadline to Feb. 13, 2004, from Dec. 31, 2003
  • Oct. 10, 2003 Amends purchase date
  • July 3, 2003 Amends purchase date
  • June 6, 2003 Initial offer to buy PeopleSoft

Oracle estimates it will need about $7.5 billion to purchase the PeopleSoft shares at its current asking price of $19.50 per share, and to pay for related fees and expenses. As of mid-December, 12.4 million shares of PeopleSoft stock had been tendered to Oracle.

Should the anticipated loans fall through, Oracle expects it can raise funds through additional borrowing or through the issuance of securities, according to the SEC filing. "What we filed with the SEC is simply an extension of a credit facility that will enable us to fund the intended acquisition of PeopleSoft. We lowered the amount on hand with the bankers because we have so much cash on our balance sheet. The tender offer remains fully funded and is still not subject to any financing conditions," said Deborah Lilienthal, spokeswoman for Oracle.

The week previous (Dec. 19), Oracle extended its tender offer for rival PeopleSoft, of Pleasanton, Calif., to Feb. 13, 2004. This is the third time Oracle has extended its offer since the initial bid was made last June. This latest offer was set to expire Dec. 31, 2003.

The hostile bid has been on hold pending investigations by the Department of Justice and the European Union, both of which are looking at potential antitrust issues.

A DOJ spokeswoman said two weeks ago that no decisions had been made in regard to Oracles bid. Oracle has said in the past that it expects a decision from the DOJ this month.

PeopleSoft remains unmoved from its position that it will successfully thwart Oracles takeover attempt. Oracle has countered with plans to institute a group of alternative directors for PeopleSoft, thus offering shareholders the option to be bought outright by Oracle.