PeopleSoft to Oracle: The Answer Is Still No

PeopleSoft's board of directors has formally voted to recommend that shareholders reject Oracle's (Nasdaq: ORCL) sweetened takeover bid, saying the deal still undervalues the smaller company. Oracle's new offer of US$19.50 per share, made public Wednesday, is still "not in the best interest of shareholders," according to PeopleSoft.

The board cited four main concerns: likely regulatory delays and possible antitrust roadblocks to the merger; the fact that the offer still "undervalues" PeopleSoft's future worth; Oracle's stated intention to discontinue some PeopleSoft products; and the fact that the offer could be withdrawn by Oracle at any time.

Thanks Anyway

The offer is "highly conditional, faces significant regulatory delays and uncertainty, and threatens serious damage to our business," said PeopleSoft CEO Craig Conway, who seems to have toned down his rhetoric surrounding the deal after lashing out at Oracle last week.

The move by Oracle to add $1.2 billion to its original tender offer put PeopleSoft's board in a difficult position, according to analysts, because the new price is much closer to what shareholders had hoped to get. In fact, it represents a premium of about 20 percent over recent trading prices of PeopleSoft stock.

But PeopleSoft is sticking to its guns, with Conway saying his company remains committed to its acquisition of J.D. Edwards. That deal got under way Thursday despite a host of attempts by Oracle to disrupt it.

Deadly Delays

Regulatory concerns may carry the most weight with shareholders, according to Gartner (NYSE: IT) analyst Betsy Burton. With Connecticut's attorney general already vowing to block the deal, others may be ready to follow suit.

"Oracle may yet take control of PeopleSoft, but it could take a lot longer than anyone expects," Burton told the E-Commerce Times. "In that scenario, shareholders worry about the damage to the business of all the companies involved. A long period of uncertainty and relative chaos could be deadly."

Indeed, analysts say there are already signs that customers of the various players involved are beginning to get edgy, with PeopleSoft moving to soothe fears by building contingency language into licensing agreements. Meanwhile, outside rivals like SAP (NYSE: SAP) and Siebel are scrambling to take advantage of the turmoil by launching aggressive sales and marketing campaigns.

Beefing Up

Hardly playing the part of the passive acquisition target, J.D. Edwards revealed it has changed the compensation packages top executives are slated to receive if its merger with PeopleSoft goes through.

The new terms are aimed at making it worthwhile for top Edwards executives to stay on board through completion of the merger and subsequent integration, the company said. J.D. Edwards filed suit against Oracle last week, alleging that its bid for PeopleSoft is designed to thwart the merger.