Oracle Raises Its Bid For PeopleSoftOracle Raises Its Bid For PeopleSoft

The battle for PeopleSoft's future intensified on Wednesday, when Oracle upped its hostile takeover offer by about 22% to $6.3 billion--that's $19.50 for each PeopleSoft share, compared with its original $16 offer.

In addition to raising its bid, Oracle countered suits filed by both PeopleSoft and J.D. Edwards & Co., which PeopleSoft is attempting to acquire, with its own suit. Oracle filed a suit against PeopleSoft, its board of directors, and J.D. Edwards alleging they breached their fiduciary duties by conspiring to derail Oracle's attempt to buy PeopleSoft. The suit is in response to PeopleSoft's revision of the terms of its proposed offer to buy J.D. Edwards, which eliminates the need for a shareholder vote.

Hours after Oracle's revised offer, PeopleSoft issued a statement saying 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 statement read.

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

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

Meanwhile, the state of Connecticut filed an antitrust suit against Oracle, alleging that the takeover will violate state and federal laws and damage the state and its economy and raise prices by reducing competition.

The state has a five-year, $100 million contract with PeopleSoft. In a statement, state comptroller Nancy Wyman said a takeover would create an "enormous and expensive upheaval" of the project, which is set to being its first phase of operation next month.

Late last week, PeopleSoft's board voted unanimously to reject Oracle's bid and recommended that its stockholders do the same. PeopleSoft also filed suit against Oracle to stop what it says is a sham tender offer aimed at destroying PeopleSoft's business, and J.D. Edwards filed suit claiming that Oracle has "tortiously interfered with its proposed merger with PeopleSoft." The suit seeks $1.7 billion in compensatory damages and an unspecified amount in punitive damages.

J.D. Edwards also filed suit against Oracle chairman and CEO Larry Ellison, and executive VP Chuck Phillips, alleging that they have engaged in wrongful conduct and unfair business practices. It seeks an injunction that enjoins Oracle from proceeding with its tender offer for PeopleSoft.

In a conference call Wednesday with financial analysts, Oracle executive VP and CFO Jeff Henley said the new price for PeopleSoft is a clear indicator that Oracle is serious about its offer. He said Oracle execs have been meeting with PeopleSoft shareholders--the majority of whom also hold Oracle stock--and that "It was clear to us shareholders of both companies endorsed the strategy and concept behind our acquisition. Every shareholder we met recognized the sizeable synergies inherent in this acquisition and how Oracle would become a more significant competitor to Microsoft, SAP, and other companies in the software industry."

SAP dominates the market for business applications, followed by Oracle, PeopleSoft and about 3,000 smaller vendors.

The biggest potential impediment to an Oracle takeover is a poison pill provision PeopleSoft's management could activate. 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 [PeopleSoft's] board to face up to the reality that they need to get rid of this pill," Henley said.