Oracle Corp. sweetened its hostile bid for rival business software maker PeopleSoft Inc. to $9.2 billion Monday, a 14 percent increase aimed at resolving the long-running takeover battle between the bitter foes.
The new all-cash bid of $24 per share raises the stakes from $21 per share — an offer that Pleasanton-based PeopleSoft rejected as inadequate in May. It marked the fourth time that Redwood Shores-based Oracle has revised its bid since it began its attempt to buy PeopleSoft nearly 17 months ago.
Oracle described its latest bid as its “best and final offer,” setting the stage for the climactic scenes in a Silicon Valley soap opera that has featured courtroom confrontations and catty remarks.
The company punctuated its take-it-or-leave-it ultimatum with a promise to abandon the takeover attempt if a majority of PeopleSoft’s shareholders hasn’t accepted the new offer by a midnight EST Nov. 19 deadline.
“We think the time has come for the stockholders of PeopleSoft to decide the outcome,” Oracle Chairman Jeff Henley said during a Monday conference call with analysts.
In a statement issued Monday, PeopleSoft’s board advised the company’s shareholders to take no action until the directors reviewed Oracle’s latest offer “in due course.” The board’s statement noted that in February it rejected an Oracle offer of $26 per share — the highest bid made since the stand-off began.
The latest bid represents a 59 percent premium above PeopleSoft’s stock price before Oracle first launched its bid in June 2003.
PeopleSoft’s shares gained $2.13 to $22.90 in late trading Monday on the Nasdaq Stock Market. Oracle shares were up 12 cents, at $12.78, also on the Nasdaq.
It makes sense for Oracle to draw a line in the sand because the ordeal has become a distraction for both companies, said AMR Research analyst Bruce Richardson.
Meta Group analyst David Yockelson said the strategy also gives Oracle a graceful way to bow out if PeopleSoft rebuffs the bid yet again. “It’s really the best of both worlds for Oracle,” Yockelson said. “Either they can complete the acquisition at a slight premium to what they would have paid a week ago or they can walk away honorably.”
The momentum in the takeover struggle shifted in Oracle’s favor in early September when a federal judge rejected a U.S. Justice Department lawsuit that sought to block the proposed combination on antitrust grounds.
Europe antitrust regulators provided Oracle another boost last week by dropping their objection between two of the world’s three largest makers of business applications software — the computer coding that automates a wide range of administrative tasks.
Oracle’s takeover hopes also appeared to brighten about a month ago with PeopleSoft’s unexpected firing of Craig Conway as its chief executive. Conway, a former Oracle executive, had spearheaded PeopleSoft’s resistance, often taunting his former boss — Oracle CEO Larry Ellison — along the way.
PeopleSoft replaced Conway with its chairman and co-founder, Dave Duffield, who cultivated an anti-Oracle culture after he started the company in 1987. Since returning as CEO, Duffield has stressed that he didn’t come out of semiretirement to sell PeopleSoft, even as other board members have toned down the acrimony and signaled they would be willing to negotiate a friendly takeover if Oracle raised its bid from $21 per share.
Oracle believes a PeopleSoft takeover would create an even more profitable company that’s better equipped to compete with business applications software leader SAP of Germany, as well as more diversified technology giants Microsoft Corp. and IBM Corp.
If it consummates the takeover, Oracle has said it will fire more than half of PeopleSoft’s 11,500 employees, but the cutbacks might not be quite as severe under the terms of the revised bid.
Besides changing its price, Oracle promised to introduce a new generation of PeopleSoft products — a move apparently aimed at appeasing many of the PeopleSoft customers who opposed the takeover attempt. Oracle previously had planned to stop developing new PeopleSoft products while supporting the existing lines of the company’s software for at least a decade.
Oracle’s product pledge might help the company protect itself from unusual refund guarantees that PeopleSoft has made to its customers. Through Sept. 30, PeopleSoft had pledged to refund up to $2.4 billion to customers if the company is sold and a new owner doesn’t provide adequate product support.
Monday’s higher bid apparently was triggered by a Delaware Chancery Court Judge Leo Strine, who is preparing to issue a decision in a recently completed trial contesting two of PeopleSoft’s antitakeover measures. Henley told analysts Monday that Strine had asked Oracle to put its best offer on the table before he makes his decision.
If PeopleSoft’s board refuses to drop an antitakeover provision known as a “poison pill,” Oracle intends to urge Strine to force the company to abandon the defense. The poison pill is designed to make unwelcome takeover attempts too expensive to pull off by flooding the market with new shares.
The higher offer also could prompt PeopleSoft’s shareholders to pressure the board to succumb to Oracle.
Some industry analysts believe Oracle can afford to pay even more for PeopleSoft — a position that might give PeopleSoft’s board grounds to reject the latest offer. PeopleSoft is also coming off a strong third quarter — another potential bargaining chip.
“My gut feeling is that PeopleSoft’s board will reject this offer and PeopleSoft will still be an independent company come Nov. 20,” Richardson said.
Friedman, Billings, Ramsey & Co. analyst David Hilal advised PeopleSoft shareholders to accept the bid. “We believe the odds of a merger have greatly increased,” Hilal wrote in a Monday note to clients.