PeopleSoft board turns down 'final' Oracle offer

PeopleSoft's board today rejected Oracle's final takeover offer. Oracle CEO Larry Ellison has now pinned his hopes on PeopleSoft shareholders.

PeopleSoft Inc.'s board of directors Wednesday unanimously rejected Oracle Corp.'s "best and final" offer, putting the next chapter of Oracle's 17-month hostile takeover bid in the hands of PeopleSoft shareholders.

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"The board concluded that PeopleSoft is worth substantially more than Oracle's latest offer," said chairman and CEO Dave Duffield in a statement.

The offer of $24 per share, made last week, is scheduled to expire at midnight Nov. 19. Oracle's only remaining hope is PeopleSoft shareholders vote against the board later this month.

"Oracle's board deliberated and concluded that the absolute maximum amount we were prepared to pay was $24 dollars a share," Oracle CEO Larry Ellison said today in a statement. "Beyond that, there are better uses of our capital, including other acquisitions and repurchasing our own shares. Oracle has been at this for a year-and-a-half and it is now time to bring this matter to a close. On November 19th, we will respect the will of the shareholders."

That might sound like Ellison is done fighting, but some industry analysts said PeopleSoft shareholders could reject the board of directors' recommendation.

"Nothing is over until it's over, and it ain't over yet," said Joshua Greenbaum, principal analyst at Berkeley, Calif.-based Enterprise Applications Consulting.

The board concluded that PeopleSoft is worth substantially more than Oracle's latest offer.
Dave Duffield
CEOPeopleSoft

''Look for more 'final offers' to come, and watch out for the institutional investors," Greenbaum said. "They own 70% of the company, and have to be wondering how current management intends to drive the stock up beyond the current Oracle offer."

However, PeopleSoft executives yesterday said strong Q3 results and improved revenues from license sales were key reasons they recommended against the offer.

The hostile takeover bid has been marked by courtroom drama, public posturing, attacks and counter-attacks -- and the firing of former PeopleSoft CEO Craig Conway. Bringing an end to the controversy will be good for both companies, said Erin Kinikin, vice president, enterprise applications, with Cambridge, Mass.-based Forrester Research.

"I hope it's the end," Kinikin said. "Since Oracle made the offer, both Oracle and PeopleSoft's application revenue has gone down double digits -- and SAP has gone up double digits. Ending this one way or the other is going to be good for Oracle and PeopleSoft."

PeopleSoft's board yesterday maintained its position that Oracle undervalued the company with an $8.8 billion offer.

The Oracle-PeopleSoft drama may have another chapter, but Oracle did recently show the first sign of surrender. Last week, Oracle announced that its most recent offer was its "best and final" bid.

Oracle executives have been meeting this week with PeopleSoft's largest shareholders in an attempt to convince them that PeopleSoft stock will plummet once Oracle withdraws its $8.8 billion offer.

Now may be the time for Oracle to turn to other takeover targets, Kinikin said.

"At some point you have to take the rejection and find someone who will say 'yes,'" Kinikin said.

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