Wednesday raised its bid for PeopleSoft from $5.1 billion to $6.3 billion, significantly sweetening the offer in what has become an escalating takeover/merger struggle among three enterprise application companies.
The database giant also fired back at lawsuits from PeopleSoftand its intended merger partner before Oracle's bid, J.D. Edwards, by saying it intends to file a suit against the companies.
Redwood Shores, Calif.'s Oracle made a cash tender offer to purchase all of the outstanding shares of Pleasanton, Calif.'s PeopleSoft to $19.50 per share, up $3.50 per share from the original offer of $16 made June 6.
The move is the latest in a fierce battle pitting PeopleSoft and Denver's J.D. Edwards -- two enterprise application vendors and merger hopefuls -- and Oracle, who launched its own hostile bid for PeopleSoft days after PeopleSoft and J.D. Edwards announced their intentions to merge. A competing maker of business applications, Oracle is looking to stave off that merger.
Jeff Henley, Oracle Executive Vice President and CFO, said the sweetened deal, a 29 percent premium to PeopleSoft's stock price before his company's June 6 offer, was decided upon after speaking to PeopleSoft shareholders about what they felt was a fair offer.
Oracle Executive Vice President Chuck Phillips moved to clear up any misconceptions on a conference call Wednesday.
"We are extending the support period for PeopleSoft products," said Phillips. "Contrary to numerous reports in the press, we do not plan to eliminate support for PeopleSoft products -- period. PeopleSoft customers will not be forced to migrate to Oracle applications -- period. Instead, when and if these customers elect to migrate to Oracle's eBusiness Suite, they will receive a free license upgrade for like modules."
Peopleoft responded to the revised offer by advising shareholders not to act, noting that its board of directors will meet to discuss Oracle's new tender offer.
Oracle's reaffirmation of its intent was supported in the industry.
Ken Marlin, managing partner at high-tech investment consulting firm Marlin & Associates, said the bid increase solidifies Oracle's intent as serious.
"Absolutely, I think it's attractive," Marlin told internetnews.com. "They've [Oracle] been serious from the begining. Pundits have speculated somehow that he [Ellison] was not, but this has always made fabulous strategic sense for Oracle. I think that Ellison's opening bid was a reasonable place to start. He signaled from the beginning that he tried to have discussions with PeopleSoft and negotiate in good faith to remove the poison pill. This new bid values the company at 3 times its current revenue. That's a healthy price for a company whose revenue growth is not what it once was."
Marlin said all industry eyes are now on PeopleSoft. "This puts pressure on PeopleSoft's board to exercise fiduciary reponsibility to the shareholders. This is a classic case of where we'll find out whose interests the board is trying to protect. I think the probability is very high that if PeopleSoft spurns Oracle, and goes ahead with its J.D. Edwards merger, you'll see a drop in their purchase price. There is some danger that PeopleSoft's stock price will drop below Oracle's original bid of $16 -- and then you'll see some lawsuits."
Forrester Research analyst Paul Hamerman agreed the bid increase shows that Oracle is serious. However, he still believes that if PeopleSoft's board takes the offer to shareholders and they approve the offer, the deal could be tied up by regulatory issues for months.
"Oracle still gains if this runs into regulatory issues," Hamerman told internetnews.com. "Even if they're not successful, they will have disrupted PeopleSoft's sales cycle and left a dark cloud over that company. This just gets uglier by the minute and there will be more lawsuits."
Also, in its response to lawsuits by both PeopleSoft and J.D. Edwards over the hostile bid, Oracle also said it will file suit Wednesday in a Delaware court against PeopleSoft, its board of directors, and J.D. Edwards "in response to their collective efforts to eliminate PeopleSoft shareholders' ability to accept Oracle's tender offer."
Oracle said it is filing the suit because it claims PeopleSoft and its board failed to act in the best interest of PeopleSoft's shareholders. Oracle will ask that the amended J.D. Edwards merger agreement with PeopleSoft be cancelled, and that PeopleSoft's "poison pill" be removed.
Oracle's maneuvers follow two weeks of lunge and parry, which started when PeopleSoft announced a definitive merger with J.D. Edwards June 2, leading up to Monday, when PeopleSoft and J.D. Edwards improved their deal for shareholders and are looking to speed up their plan.
Meanwhile, PeopleSoft is scheduled to launch an advertising campaign Wednesday, according to the Wall Street Journal, which said that it will feature customers supporting PeopleSoft and bashing Oracle for its takeover bid in newspaper ads.