Posted on 11/19/2004 11:48:35 PM PST by mhx
Oracle prevails in PeopleSoft tender Stage set for potential proxy battle in the spring
LOS ANGELES (CBS.MW) -- Oracle Corp. cleared a crucial hurdle Friday night in its $9.2 billion bid to take over PeopleSoft Inc., winning a clear majority of shares in its smaller rival following a direct appeal to investors.
More than 60 percent of PeopleSoft (PSFT: news, chart, profile) shares were tendered in favor of the $24-per-share offer, Oracle (ORCL: news, chart, profile) said in a statement released less than an hour after the deadline for accepting the bid expired.
In a letter to PeopleSoft seeking to meet with its board, Oracle demanded a deal before the market opens on Monday.
"We believe it is time to bring this matter to a close, for the good of PeopleSoft's shareholders, customers, and employees," Oracle said. "We are prepared to complete and pay for the acquisition of all outstanding shares of PeopleSoft upon satisfaction of the remaining conditions, which are all in your control."
Combining with PeopleSoft would make Oracle a stronger counterweight to Germany's SAP (SAP: news, chart, profile), the world's largest player in business software.
For Oracle's outspoken chief executive, Larry Ellison, the outcome marks a major victory in his 17-month pursuit to acquire PeopleSoft, although the battle isn't over just yet.
Oracle must now overcome an array of anti-takeover measures by PeopleSoft, including its "poison pill" plan. But experts said it appears only a matter of time before Ellison is able to close in for the kill now that investors have thrown their support behind the controversial deal.
Demands
In its letter to PeopleSoft, Oracle again demanded it drop its poison pill plan and called its offer "fully valued" and "fair," while pointing out "there are no alternative bidders or counter-offers."
A spokesman at PeopleSoft headquarters in Pleasanton, Calif., would only say the company would respond "in due course."
Signs so far point to a possible proxy battle for control of PeopleSoft's board at next annual meeting, to be held some time in the spring. Oracle has until Thanksgiving Day next Thursday to submit its proposed board slate.
But before that, the outcome of Oracle's lawsuit is likely to take center stage.
The disputed poison pill, a measure commonly adopted to fend off unwanted buyouts, would flood the market with PeopleSoft shares, effectively making an acquisition impossible to carry out.
Redwood Shores, Calif.-based Oracle had vowed to wash its hands of the deal, calling the current proposal its "best and final" offer, unless a majority of PeopleSoft shares were tendered in its favor by midnight Friday.
"I think it was a win-win for investors to tender in order to keep the bidding going," said William Lawlor, who leads the mergers and acquisitions group at the law firm of Dechert LLP in Philadelphia.
"It is a win-win because even if PeopleSoft shareholders want Oracle to cough up more, tendering by the deadline does not mean that's the end of the deal," Lawlor said. "Shareholders can always withdraw their shares after the deadline."
Court hearing set
Lawyers for the companies are due back in Delaware Chancery Court on Wednesday for a hearing in Oracle's lawsuit that seeks to invalidate PeopleSoft's poison pill and a customer-rebate program, which would trigger prohibitively high costs if the takeover occurs.
Most observers say it's unlikely the judge in the case would force PeopleSoft's board to remove its poison pill.
From the battle's start in June 2003, PeopleSoft has vehemently opposed the takeover bid, and founder Dave Duffield isn't expected stop fighting now.
"I don't see them waving the white flag," Lawlor said. "They'll view the tender results as not being precisely a surrogate for a proxy contest and it's not. I think they'll continue the good fight."
Some legal analysts, however, say such a strategy would be ill-advised after a majority of shares are tendered in favor of the proposal.
PeopleSoft has continually maintained that Oracle's offer, which once stood as high as $26 a share, has been too low.
Ahead of the tally, investors appeared to be betting that Oracle would prevail, with PeopleSoft shares gaining 1 percent to close up 25 cents at $23.17. The stock's closing price was around 3.5 percent below Oracle's offer. Shares of Oracle fell 22 cents, or 1.7 percent, to close at $12.75.
Oracle has said it doesn't expect to have to deal with the customer-rebate program. That plan could add up to $2.4 billion in extra liability to the deal if Oracle failed to maintain support services for PeopleSoft products, but Oracle says it intends to continue supporting them.
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