Oracle Raises PeopleSoft Bid To $26 Per ShareOracle Raises PeopleSoft Bid To $26 Per Share

Oracle on Wednesday raised its bid to acquire PeopleSoft to $26 per share, or about $9.4 billion--$10 a share more than the vendor offered when it originally made its hostile takeover play for PeopleSoft last summer, and a premium of nearly 19% over PeopleSoft's closing price of $21.89 on Tuesday.

"This is our final price. We urge PeopleSoft's directors to seriously consider our offer and put the interests of their stockholders first," Oracle chairman and CFO Jeff Henley said in a statement. "We strongly recommend that PeopleSoft stockholders make their views known by tendering their shares, approving our proposal to increase the size of the board to nine members, and voting to elect five independent directors." As of Tuesday night, approximately 10,632,087 PeopleSoft shares had been tendered and not withdrawn, Oracle said.

Oracle's most recent offer of $19.50 per share was set to expire at midnight on Feb. 13, but the vendor is extending the all-cash tender offer for all of PeopleSoft's common stock to midnight EST on March 12.

The Department of Justice, which has been looking at the proposed takeover to see if it violates anti-trust laws, is expected to make a decision regarding antitrust approval before March 12. European regulators also are conducting an antitrust review, and a group of state attorneys general are mulling a possible challenge. The European review is scheduled to be completed by April 21.

Ron Hanscome, a senior program director at IT research and consulting firm Meta Group, says the Justice Department's decision is key.

"I think that the likelihood is greater than it has been, but I don't see the acceptance of the offer going through until the Department of Justice makes its ruling," he says of the chances that PeopleSoft will approve the increased offer. "There are a lot of variables that make the decision hard to predict. There are also other legal actions pending. The legal battle is far from over regardless of what happens. There is a possibility that Oracle will sue the Justice Department after the outcome is known."

PeopleSoft said earlier this week it will hold its annual stockholders meeting on March 25; in a statement, president and CEO Craig Conway said that "The PeopleSoft board unanimously voted to hold its annual meeting on March 25, so that we could put Oracle's apparent efforts to interfere with our business behind us as soon as possible. We firmly believe that Oracle is trying to deny PeopleSoft stockholders the real value of this company."

Oracle has nominated five alternative directors in an effort to gain majority control of PeopleSoft's board. PeopleSoft is asking its shareholders to re-elect four incumbent directors, including Conway, who have already joined in the unanimous votes rejecting Oracle's bid.

"Given that Oracle has put up a slate of five board members," Hanscome says, "the March 25 meeting could be highly contentious."

Ken Carey, enterprise and application software analyst at Susquehanna Financial Group, said earlier this week that if Oracle were to increase its bid, it would do so prior to the shareholder vote on the slate of directors nominated by Oracle.

The Oracle-PeopleSoft saga began last summer, right after PeopleSoft unveiled its own plans to acquire enterprise applications vendor J.D. Edwards & Co. In response to Oracle's latest announcement, PeopleSoft issued a release advising its stockholders to take no action at this time. The statement said PeopleSoft's board of directors will meet to review and discuss Oracle's revised tender offer and subsequently will make its recommendation to stockholders.

In the statement, the company noted that it believes there's a significant likelihood the merger wouldn't gain approval because of antitrust concerns. If Oracle succeeds in its takeover, it will have 25% of the enterprise applications market, and the combined Oracle-PeopleSoft entity will become one of the largest ERP vendors in the manufacturing sector.