Oracle Raises PeopleSoft Bid in 'Final Offer'

Oracle (Nasdaq: ORCL) has raised its bid to acquire rival PeopleSoft to about US$9.4 billion, or $26 per share. Oracle's amended offer is a little less than 19 percent higher than PeopleSoft's Tuesday closing price of $21.89 per share.

In response to the news, PeopleSoft's share price rose to $23.18 by midmorning Wednesday, while Oracle's share price dropped slightly to $13.58 per share.

Oracle CEO Larry Ellison said he believes the acquisition would foster competition and make Oracle even more profitable. He also stood by a pledge to support PeopleSoft customers and provide enhanced support for PeopleSoft products.

"This is our final price," Jeff Henley, Oracle chairman and CFO, said. "We urge PeopleSoft's directors to seriously consider our offer and put the interests of their stockholders first."

"PeopleSoft's board of directors, consistent with its fiduciary duties, will meet to review and discuss Oracle's revised tender offer and will make its recommendations to PeopleSoft stockholders in due course," PeopleSoft spokesperson Steve Swasey told the E-Commerce Times.

Price a Non-Issue

Forrester Research principal analyst Byron Miller told the E-Commerce Times that he was surprised by news of the raised per-share offering.

"It's interesting because in a meeting with analysts last week, [Oracle president] Chuck Phillips was asked why Oracle hasn't raised its share price offering for PeopleSoft. Phillips said that until the DOJ (Department of Justice) rules on the antitrust issue, price is a non-issue," Miller said.

"I'm still of the same opinion that it is a non-issue until DOJ gives a ruling on this," he added.

According to Oracle, the DOJ is expected to make its decision on whether or not to approve the deal sometime before March 12th. As a result, the company has moved up the expiration date of its amended offer to midnight Eastern time the same day.

Miller said he cannot get an accurate read on when the DOJ actually will rule on the matter. The department has yet to provide either party with a set date for the ruling. Not surprisingly, the merger cannot move forward until the DOJ makes up its mind.

Passing Oracle's Slate

Oracle, meanwhile, reiterated that it has nominated five candidates for PeopleSoft's board of directors and put forth a stockholder proposal to increase the number of people who sit on PeopleSoft's board by one, to a total of nine.

"We strongly recommend that PeopleSoft stockholders make their views known by tendering their shares, approving our proposal to increase the size of the board, and voting to elect five independent directors," CFO Henley said.

Miller pointed out that if Oracle is not successful in getting its board of directors approved, the DOJ's ruling will not matter. "The new slate is necessary to remove poison-pill provisions that are in place," he said. "Oracle is [betting that] the larger offer will be more attractive to PeopleSoft shareholders and that they will vote in" the new slate.

Forrester vice president Paul Hamerman told the E-Commerce Times that, like Miller, he was initially surprised by Oracle's offer, given that Larry Ellison said last week that he had no plans to change the previous offer.

However, Hamerman said, Oracle's rationale for raising its bid now seems clear: Oracle wants its slate of directors approved by PeopleSoft's shareholders. With Thursday serving as the final day to purchase shares and gain eligibility to vote at this year's annual shareholders' meeting, Oracle needed to add credibility to its proposal.

Analysts Skeptical

Hamerman said the proposed PeopleSoft-Oracle merger would not be a good thing for the software industry because it would limit customer choice significantly, particularly for large customers in the United States that purchase ERP applications.

Miller noted that he does not think the merger would serve PeopleSoft well.

"[PeopleSoft] is viable on its own and has a set of customers who chose PeopleSoft over Oracle to begin with," he said. "There is no benefit for Oracle customers in the short term, either," he added, "because of the distractions" the situation has created.