In the midst of a civil trial in which Oracle Corp. seeks to remove several substantial barriers to its $7.7 billion hostile takeover of PeopleSoft Inc., the latters board of directors quietly extended one of those barriers.
PeopleSofts board announced last week it had extended its CAP (Customer Assurance Plan) through this quarter, which ends Dec. 30. The latest version of the CAP, which guarantees customers cash in the event that Oracle ends product support within four years of an acquisition, expired Sept. 30. The almost two weeks it took PeopleSoft to renew the program left some legal experts and analysts to speculate that the Pleasanton, Calif., company was signaling a readiness to negotiate with Oracle on a buyout agreement.
But last weeks extension sends an equally strong message.
“I think this is a negotiation. Oracle, now that they feel they are in the drivers seat, has leaked that they may reduce substantially their offer for PeopleSoft,” said business litigation expert Robert Christopher, head of litigation for Northern California with Coudert Brothers LLP, in Palo Alto, Calif. “I would construe this as a retaliatory response to Oracles indication that they would lower their offer. I take [this as PeopleSoft saying,] If youre going to change the offer, we may not be so easy; we may not be so cooperative. We need to keep our options open.”
Oracle executive says company might reduce bid for Peoplesoft.
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During testimony last week, Oracles co-president, Safra Catz, suggested that the Redwood Shores, Calif., company may lower its current $21 tender offer for PeopleSoft.
But Philip Ferscht, an analyst at The Yankee Group, in Boston, said he believes last weeks CAP extension suggests that PeopleSoft is holding firm in a fight for its life.
“The significance [of extending the CAP] is that PeopleSoft will do whatever it can to stave off Oracle,” said Ferscht.
The CAP will refund to some PeopleSoft customers two to five times their license fees if Oracle acquires PeopleSoft and, within four years, stops supporting the software.
Oracle has said it would continue supporting PeopleSofts software but would not actively sell it.
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