PeopleSoft Soap Opera Still Alive

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UPDATED: Merger talks are still alive though strained in the hostile takeover soap opera between Oracle and PeopleSoft .

Oracle CEO Larry Ellison said his “best and final all cash offer” of $24 per share (an estimated $9.2 billion) has now been endorsed by a majority (61 percent ) of PeopleSoft shareholders after a vote taken late Friday.

“The owners of PeopleSoft have spoken and have overwhelmingly chosen to sell to Oracle at $24.00 per share,” Ellison said in a statement.

PeopleSoft’s board of directors responded Saturday by unanimously rejecting Oracle’s advances.

“Based on the numerous conversations we have had with our largest stockholders over the past ten days, our Board is convinced that a majority of our stockholders agree that your $24 offer is inadequate and does not reflect PeopleSoft’s real value,” PeopleSoft board member George “Skip” Battle said in a statement. “This majority is comprised of stockholders who did not tender their shares, as well as stockholders who tendered but told us that they believe PeopleSoft is worth more than $24 per share.”

Institutional investors had until midnight Friday to make up their minds before Oracle would have walked away from the deal that has now gone on for 17 months. Now with a majority of shareholders behind it, Oracle said it will now keep the offer on the table until 6:00 p.m. (EST) on Friday, December 31, 2004.

Oracle has received a vote of confidence from PeopleSoft’s third largest investor, Los Angeles-based Capital Guardian Trust as well as the California Employees’ Retirement System (CalPERS), New York State Common Retirement Fund and Ohio’s state pension fund.

In a letter to PeopleSoft’s Board, Ellison and Oracle chairman Jeffrey Henley said joining the No. 2 and No. 3 enterprise resource planning (ERP) software providers would prove to be a winning combination.

“The joint company will have a larger combined customer base, expanded brand reach, critical mass in more industries, and be able to provide substantially better global support,” Oracle’s letter read. “Most important, the combined company will be more competitive against SAP, Microsoft, and a wave of new outsourcing competitors.”

The letter also tries to convince PeopleSoft’s board to accept Oracle’s offer because there is “no business execution risk” for PeopleSoft shareholders and because no alternative bidders or counter offers have come forward.

Oracle is also requesting PeopleSoft’s Board drop its so-called “poison pill” and
customer rebate provisions. That issue is still before a Delaware Chancery court. PeopleSoft said it will ask the judge Wednesday to enforce both anti-takeover measures.

If the battle for control of PeopleSoft stretches into next year, PeopleSoft still has a $1 billion lawsuit against Oracle pending. The case is expected to start on January 10.

PeopleSoft could also hold out until the annual shareholder meeting in March, but that could potentially leave the Board venerable to a proxy fight that — if held — could find them resigning en masse.