Citing advice from Goldman, Sachs and Co. and Citigroup Global Markets Inc., PeopleSoft Inc.s board of directors urged shareholders this morning to reject Oracle Corp.s latest tender offer.
PeopleSoft announced today that its board voted unanimously to reject Oracles third bid to acquire the company. Last Wednesday Oracle, of Redwood Shores, Calif., announced that it would pay PeopleSoft shareholders $26 per share for their common stock. The offer had been revised from the companys longstanding offer of $19.50.
Oracle launched its initial hostile takeover bid for PeopleSoft last June, offering $16 per share—well below PeopleSofts average trading price in the low $20 range. Oracles initial offer followed closely on the heels of PeopleSofts announced intent to acquire e-business applications software developer J.D. Edwards & Co., a purchase that was completed in near record time later that summer.
On June 18 Oracle increased its bid to $19.50 per share.
PeopleSofts board said in a statement released this morning that based on “fundamental valuation measures” it concluded Oracles offer is again undervaluing the companys overall value—particularly in light of its ongoing efforts to integrate J.D. Edwards.
The board recommended that PeopleSoft shareholders not tender their shares to Oracle—advice thats been heeded to date. About 10 million of PeopleSofts 361 million shares have been tendered to Oracle as of Feb. 4, according to Oracle officials.
In making its latest recommendation to shareholders, PeopleSofts board concluded that Oracles revised offer is inadequate “from a financial point of view,” according to the statement.
“Given PeopleSofts uncertain future as a stand-alone company and the fact that, for the first quarter, PeopleSoft guided analysts below the consensus estimates, Oracle believes that its offer is full and generous,” said Jim Finn, an Oracle spokesman.
“Since PeopleSofts current directors persist in their refusal even to discuss the offer with Oracle, PeopleSoft stockholders can act in their own best interests by tendering their shares and voting to elect the slate of five independent directors to the PeopleSoft board.”
Oracle is mounting various fronts in its battle to acquire PeopleSoft. In addition to the increased tender offer, the company announced late last month its own slate of nominees for PeopleSofts board, and is attempting to change the companys bylaws to oust a fifth member.
PeopleSoft later announced its nominees for the board—four sitting members—and set the date for its annual shareholders meeting for March 25. Contingent to that date, shareholders can begin casting their proxy votes today.
Oracle is also waging battle on the legal front, with a suit filed in Delaware that looks to have the court force PeopleSofts board to remove its poison pill anti-takeover device and at the same time rescind its Customer Assurance Program. The controversial CAP program would require that some customers receive refunds between two and five times their license fees in the event of a hostile takeover bid.
PeopleSoft, for its part, has filed a lawsuit in Alameda County, Calif., that seeks redress from Oracles hostile takeover bid. In that case PeopleSoft is asking the court to force Oracle to remove its tender offer and seek no further communication with PeopleSoft customers.
The Delaware judge overseeing Oracles case has ruled that discovery in both cases must progress concurrently. As a result, PeopleSoft is in the midst of deposing some Oracle executives, while Oracle is expected to depose PeopleSofts executives in the near future.
“We are in the process of discovery with PeopleSoft and are still awaiting for many documents to be produced,” said Oracle spokeswoman Deborah Lilienthal.
Judge Strine has set aside the last week in March and the first week in April for the trail in Delaware.
A case management conference on PeopleSofts suit is set for April 14.
The strategic moves of both companies are in a sense moot at this point, given that the U.S. Department of Justice, the European Commission and more than half the states attorneys general are in the midst of antitrust investigations regarding the hostile takeover attempt.
Even with shareholder approval, little can be done to further the acquisition until the DOJ announces its decision in the matter. Should it announce the deal is not anti-competitive, Oracle is free to pursue its tactics. On the other hand, should the DOJ look upon the deal as anti-competitive to the software industry, the deal is off.
In the latter case, its expected Oracle will again look to the courts to settle the matter—a lengthy and expensive proposition.
Oracle has said it expects a decision from the DOJ by March 12. Gina Telemona, a DOJ spokeswoman, said the department does not comment on speculated dates, but said the investigation is ongoing.
Oracles latest tender offer—which has been extended three times in the past eight months—expires March 12, the same day the DOJ decision is expected.
Editors Note: This story was updated to include comments from an Oracle spokesman.