Oracle Proposes Own Slate for PeopleSoft Board

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In an effort to extend its tendrils of influence over its hostile acquisition target PeopleSoft , Oracle late last week said that it is looking to nominate five individuals to the PeopleSoft board of directors.

Oracle, waging a battle to buy applications rival PeopleSoft for some $7.5 billion, also said it intends to introduce a stockholder proposal to expand the PeopleSoft board to nine members if PeopleSoft Director Michael Maples is not put up for election.

Oracle made the play because it is unhappy with the makeup of the current PeopleSoft board, whom it has accused of misrepresenting Oracle’s actions to the shareholders and sees as a major barrier for the successful completion of its takeover bid. Redwood Shores, Calif.’s Oracle would like to install what it considers to be independent, unbiased board members.

“We believe that the incumbent PeopleSoft Board of Directors has consistently refused to consider its stockholders’ best interests regarding the Oracle tender offer,” said Oracle spokesperson Jim Finn in a public statement. “We intend to nominate a slate of directors who will exercise independent judgment in considering the Oracle tender offer…”

Oracle has also taken issue with the status of Maples, whom Finn said has never been elected by the stockholders despite being appointed to the board. Oracle is asking that Maples stand for election at the PeopleSoft 2004 annual stockholder meeting, the date of which has not been determined.

“If PeopleSoft will not put Mr. Maples up for election, we will put forth a proposal to amend the bylaws and expand the PeopleSoft board to nine members,” Finn continued. “This newly-created directorship would be decided by the stockholders at the annual meeting, enabling the PeopleSoft stockholders to elect a majority of the board and determine for themselves who should guide the future of PeopleSoft.”

Not surprisingly, Pleasanton, Calif.-based PeopleSoft was not happy about Oracle’s proposal.

“We believe that Larry Ellison’s attempt to gain control of PeopleSoft’s Board of Directors is solely to advance Oracle’s agenda and is not in the best interests of PeopleSoft’s stockholders,” PeopleSoft said in a public statement. “We strongly believe that Ellison’s hand-picked, paid nominees are biased and would have irreconcilable conflicts of interest if elected to PeopleSoft’s board. Each nominee is receiving cash compensation and has signed an agreement with Oracle. We believe their ability to be independent is seriously compromised.”

The Oracle nominees are Dr. Duke K. Bristow, economist at the UCLA Anderson School of Management, director of the Corporate Governance Program and chair of the Annual Corporate Governance Conference; Richard L. Clemmer, president of Venture Capital Tech and former chief executive officer of PurchasePro.com; Roger Noall, former senior executive vice president and chief administrative officer of KeyCorp; Dr. Laurence E. Paul, managing principal of Laurel Crown Capital; and Artur Raviv, Alan E. Peterson Distinguished Professor of Finance at the Kellogg Graduate School of Management, Northwestern University.

Oracle said Bristow, Clemmer, Noall, Paul and Raviv will be soliciting proxies for use at the PeopleSoft 2004 Annual Meeting and will be filing a proxy statement on Schedule 14A with the Securities and Exchange Commission (SEC).

Ken Marlin, managing partner of New York-based Marlin & Associates, a mergers and acquisitions investment bank focused on media and technology, was not surprised by Oracle’s move any more than he was surprised by PeopleSoft’s strong opposition to it.

“This is an obvious attempt to keep the pressure on the PeopleSoft board and to continue to remind the shareholders of PeopleSoft that Oracle remains interested,” Marlin told internetnews.com. “It’s highly unlikely PeopleSoft will want Oracle members on the board — boards seldom welcome people with dissident points of view. This is a reminder to the board of its fiduciary responsibility to shareholders.”

What the PeopleSoft board does may be moot depending on how the U.S. Department of Justice and the European Commission view the Oracle bid. The DOJ is currently slated to conclude its investigation into whether or not the Oracle bid would be beneficial or harmful to customers and the applications market by early March.

The EC, which recently requested additional information from Oracle to take a closer look, is on schedule to announce its findings in April. At issue for both the DOJ and EC is ultimately whether or not Oracle would be violating antitrust laws by acquiring PeopleSoft, which is currently the No. 2 applications player in the market behind German leader SAP.