Thursday, June 19, 2003

Oracle raises bid for PeopleSoft

Takeover target explores options for resistance

By Rachel Konrad
The Associated Press

SAN FRANCISCO - Oracle Corp. increased its offer Wednesday for rival PeopleSoft Inc. by nearly 22 percent to about $6.3 billion, an aggressive effort to push investors to approve a deal that PeopleSoft executives have tried to thwart.

Oracle's sweetened offer is the latest salvo in increasingly bitter competition in the business software niche, which builds computer programs to run giant databases so corporate clients can store customers' credit card and other personal information, process transactions online or compile personnel data on internal Web sites.

Germany's SAP AG dominates the market, followed by Oracle, PeopleSoft and about 3,000 smaller vendors.

Oracle chief financial officer Jeff Henley said management decided to increase its cash offer to $19.50 a share from $16 a share after meetings this week with PeopleSoft's largest shareholders.

"We've received input from a broad range of investors," Henley said Wednesday. "Our revised price represents a great value for PeopleSoft shareholders."

Oracle's new offer represents a 13.7 percent premium on PeopleSoft's closing share price Tuesday. Oracle's original offer represented a premium of about 6 percent.

Shares in PeopleSoft rose 78 cents Wednesday, or 4.5 percent, to close at $17.93 each on the Nasdaq Stock Market, while Oracle shares rose 7 cents to close at $13.42.

PeopleSoft said its board of directors would discuss the new offer and make a recommendation "in due course," but urged shareholders to "take no action at this time."

"The board concluded that the original offer dramatically undervalues the company based on its financial performance, continued market leadership and significant future opportunities," the terse statement read.

As PeopleSoft shareholders prepare to vote on the Oracle bid July 7, the company is turning to some of its largest customers for help, running newspaper ads Wednesday in which Toyota Motor Corp. and Nextel Communications praise PeopleSoft. Chicago-based Distributors and Manufacturers' User Group, which represents 300 manufacturing companies, urged PeopleSoft's board to reject Oracle's bid.

The biggest impediment to a takeover is a "poison pill" provision PeopleSoft's management could activate. Considered an extreme measure, the anti-takeover defense typically fends off unwelcome suitors by issuing new shares that boost the cost of the deal.

"We've urged shareholders to get the (PeopleSoft) board to face up to the reality that they need to get rid of this pill," Henley said.

Ken Marlin, managing director at New York-based media and technology investment bank Marlin & Associates, said Oracle's latest offer is "quite fair."

"This reaffirms what (Oracle chairman) Larry Ellison has been saying for quite some time - that his offer is serious," Marlin said.

Pleasanton, Calif.-based PeopleSoft announced a plan June 2 to acquire Denver-based J.D. Edwards & Co. in a stock swap valued at $1.7 billion. Oracle, based in Redwood Shores, Calif., launched its takeover bid four days later, offering $5.1 billion to buy PeopleSoft without J.D. Edwards.

PeopleSoft executives said joining with Oracle would be difficult, if not impossible, because regulators would raise too many questions about how the deal would affect competition in the $20 billion market for business software.

Industry analysts say PeopleSoft executives - many of whom defected from Oracle - would bristle under Ellison.

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