The fracas with Oracle over its $7.7 billion hostile bid to acquire PeopleSoft has cost the latter company a boatload of cash.
PeopleSoft Inc. said Monday in filings with the Securities and Exchange Commission (SEC) that it has spent $70 million to date to fend off Oracle Corp.
From June 6, 2003—the day Oracle launched its bid to acquire PeopleSoft—through June 30, 2004, the company spent the cash to pay off what it refers to as “investment banking, legal and other fees.” In the second quarter of this year, PeopleSoft paid out $17.2 million in such fees.
The company said it also used a “significant amount” of internal resources to respond to the offer, according to the SEC filings.
The future, according to PeopleSoft, may not look any brighter.
“It is not possible to predict the amount of money or internal resources that will be required to respond to the Oracle tender offer in the future,” the company said in its SEC filings.
The tender offer has indeed been costly for both sides. Oracle said in its fourth-quarter earnings call in June that it has spent $54.2 million to date in fees to acquire PeopleSoft.
Part of that money has certainly gone to pay legal fees. The U.S. Department of Justice brought the proposed merger to trial earlier this summer, seeking a federal injunction to block the deal. Oracle is also pouring resources into responding to a similar antitrust investigation by the European Commission. That investigation is on hold pending further information from Oracle.
PeopleSoft suggested in its SEC filings that its business could be damaged whether or not the judge in U.S. District Court in the Northern District of California rules in favor of the Justice Departments case to block the deal.
Should the judge rule in favor of the Justice Department and Oracle appeals, the resulting delays and uncertainties would harm PeopleSofts business, according to Mondays filing. On the other hand, should the judge rule against the Justice Department, PeopleSofts ability to conduct business also could be adversely impacted.
And there are still two civil cases to be fought.
PeopleSoft filed suit against Oracle in Alameda County, Calif., to have the tender offer removed on the grounds that it is harmful to PeopleSofts business. That case is set to go to trial Nov. 1. At the same time, Oracle filed suit against PeopleSoft in the Delaware Chancery Court to have PeopleSofts Customer Assurance Program, which Oracle calls a “poison pill,” removed from its bylaws. That case is set to go to trial Sept. 27.
PeopleSoft, of Pleasanton, Calif., said in Mondays SEC filings that the controversial CAP program will be in effect until Sept. 30, the date Oracle has set for its tender offer to expire. Oracle has extended its tender offer a number of times already.
Under the CAP program, some users would be eligible for two to five times their license fees if PeopleSoft is acquired by Oracle and Oracle discontinues support for PeopleSoft products within two or four years of the purchase date.
PeopleSoft estimated in its SEC filings that the total liability for the CAP program for Oracle could be just over $2 billion.