PeopleSoft Board Shoots Down Latest Oracle Offer

Company's board sets the stage for a fierce fight over the fate of PeopleSoft at March 25 shareholders meeting.

In a widely expected move, PeopleSoft Monday said its board of directors voted unanimously to recommend that its stockholders reject Oracle's latest offer to purchase the company for $26 per share.

In shooting down the offer, an 8.8. percent premium that would total $9.4 billion, the Pleasanton, Calif. applications maker opens itself up for fire and criticism at the annual shareholders meeting, scheduled for March 25.

PeopleSoft said in a public statement that the board concluded the revised offer price is inadequate and does not reflect PeopleSoft's real value. The board also expressed concern that the hostile merger continues to face substantial regulatory scrutiny from the U.S.. Department of Justice (DOJ) and European Commission (EC).

PeopleSoft President and Chief Executive Officer Craig Conway essentially reiterated the company's position from the previous offers of $16.50 and $19 per share, announced in June and July, respectively.

"Oracle's offer does not begin to reflect the company's real value, including the value we are creating through our successful combination with J.D. Edwards," said Conway. "Don't underestimate the significant additional value PeopleSoft can create once the disruption from Oracle's hostile activities has ended."

PeopleSoft also blamed Oracle's actions for its lower stock performance and accused the database maker of falsely stating that PeopleSoft had lowered its guidance for its first quarter 2004 when it has only given guidance once and never revised it.

The beleaguered company also said Oracle has attempted to manipulate the antitrust process in order to cause delays to damage PeopleSoft's relationships with customers.

"We believe Oracle is using the entire process -- tender offer, antitrust and proxy solicitation -- in an attempt to damage our company," Conway said.

Oracle spokesman Jim Finn said his company believed the revised offer was generous given PeopleSoft's "uncertain future" as a stand-alone company. He also reiterated the fact that Oracle believes PeopleSoft guided analysts below the consensus estimates.

"Since PeopleSoft's 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," Finn said in a public statement.

Experts have said PeopleSoft's unwavering position may be wearing thin with shareholders, who have seen Oracle's offer for PeopleSoft balloon from $5. 1 billion to a whopping $9.4 billion since the Redwood Shores, Calif. software concern announced its first bid in June.

PeopleSoft's staunch refusals to bargain aside, the other major obstacles Oracle continues to face include approvals from the DOJ and EC, which are expected to conclude their investigations and pass judgment by March 12 and April, respectively. Moreover, Oracle would have to convince PeopleSoft to quash the "poison pill" and work around the customer assurance program, which would allow that an acquirer pay customers two to five times their licensing fees should the company change hands.

Oracle has proposed five board members whom PeopleSoft is expected to reject at the shareholders meeting. That meeting was moved up from its usual May schedule to apply pressure on Oracle in its endeavor to whip up a convincing pitch to PeopleSoft shareholders.

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