Business software maker Oracle Corp. reduced its hostile takeover bid for rival PeopleSoft Inc. to $7.7 billion Friday, shaving nearly 20 percent, or $1.7 billion, from its previous offer to reflect its prey’s wilting market value.
In its surprise move, Oracle revised its nearly year-old bid for PeopleSoft to $21 per share, reversing from the $26 per share, or $9.4 billion cash, that had been on the table.
Redwood Shores-based Oracle attributed its decision to PeopleSoft’s declining stock, which has plunged by 24 percent so far this year as many investors abandoned hope the deal would go through because of a looming antitrust trial. Before Oracle’s disclosed its revised bid, PeopleSoft’s shares fell 31 cents Friday to close at $17.30 on the Nasdaq Stock Market. In after-hours trading, the shares fell another 30 cents.
Oracle Chairman Jeff Henley reiterated his company’s continued interest in buying PeopleSoft, saying “this deal will benefit stockholders of both companies.”
In a statement issued late Friday, Pleasanton-based PeopleSoft blasted Oracle for revising its bid just before next week’s major customer conference. “This is one more instance of what we firmly believe is Oracle’s ongoing effort to damage our business.”
The company’s board of directors has previously rebuffed three other Oracle bids, including the peak $9.4 billion price.
‘A shot across the bow’
By lowering its bid, Oracle underscores how much money PeopleSoft’s stockholders might have made had its board been more receptive, said Ken Marlin, a New York investment banker specializing in high-tech deals.
“It’s a shot across the bow,” he said. “It sends a message to PeopleSoft’s board saying, ‘Your resistance just cost your shareholders $1.7 billion, so you better not continue to resist us or you could cost shareholders even more.”’
Friday’s gamesmanship is the latest twist in a Silicon Valley soap opera starring two outspoken software executives — Oracle’s Larry Ellison and PeopleSoft’s Craig Conway — who have colorfully skewered each other throughout the saga.
Although Oracle continues to pursue PeopleSoft, the chase has been in a holding pattern since late February as the company prepares to defend itself in an antitrust case brought by the U.S. Department of Justice.
Government seeking to block deal
The government is seeking an injunction to prevent Oracle from buying PeopleSoft, saying the combination would drive up prices and reduce the product choices for major corporations that need sophisticated software to run their personnel and accounting departments.
PeopleSoft had helped rally support for the Justice Department’s case by urging its customers to contact antitrust regulators to express their concerns about the deal.
Oracle says its will prove regulators wrong in a monthlong trial scheduled to begin June 7. The company’s PeopleSoft bid is set to expire July 25, although Oracle has extended the deadline numerous times since making its initial offer of $5.1 billion, or $16 per share, last June.
PeopleSoft’s shrinking market value might not be the only reason Oracle lowered its bid.
Oracle also has warned PeopleSoft to drop an unusual sales program guaranteeing customers refunds of as much as five times the purchase amount if the company is sold and the new owner makes significant product changes. Oracle maintains the refund guarantees, totaling $2 billion through March, have made PeopleSoft less attractive to all potential suitors.