PeopleSoft’s Board Rejects Oracle’s Bid

After 17 months of executives’ wrangling over the fate of PeopleSoft Inc., shareholders will finally get their say.

PeopleSoft’s board handed the question to investors Wednesday by rejecting Oracle Corp.’s “best and final,” $8.8-billion takeover offer.

PeopleSoft shareholders have until Nov. 19 to support Oracle’s hostile bid for the Pleasanton, Calif.-based software maker. If a majority tenders its shares for the offer of $24 apiece, the fight is likely to continue in the courts.

But Oracle repeated its promise to walk away if it failed to win over shareholders.

“Oracle has been at this for a year and a half, and it is now time to bring this matter to a close,” Oracle Chief Executive Larry Ellison said. “We will respect the will of the shareholders.”

PeopleSoft executives, on the other hand, pledged to fight on even in the face of shareholder opposition. In a conference call with analysts, the executives conceded that they might lose the tender battle.

“We recognize it’s a nonbinding straw poll,” PeopleSoft co-President Kevin Parker said.

Nonetheless, the board remains convinced that “PeopleSoft is worth substantially more than Oracle’s latest offer,” said PeopleSoft founder Dave Duffield, who took over the company after former CEO Craig Conway was ousted last month.

If Oracle succeeds, the next move will be by Delaware Chancery Court Judge Leo Strine. Strine is set to hold a Nov. 24 hearing on Oracle’s suit to strike down PeopleSoft’s “poison pill” anti-takeover defense. The poison pill allows the board to flood the market with new shares, making a takeover too expensive to consummate.

If Oracle gets a majority of shares tendered and the poison pill is upheld, the database company’s next step would be to run a slate of directors in a proxy fight for control of PeopleSoft’s board. If Oracle’s slate wins, it could revoke the poison pill.

Given how quickly the Nov. 19 deadline is approaching, Parker said the company would woo shareholders, “presuming there will be a proxy battle.”

PeopleSoft rejected Redwood City, Calif.-based Oracle’s offer after the market closed. In after-hours trading, PeopleSoft shares dropped to $22.45, after falling 23 cents to $22.79 during regular trading. Oracle shares dipped to $13.32 in late trading after rising 3 cents to $13.38. Both trade on Nasdaq.

Also on Wednesday’s call, PeopleSoft executives forecast 2005 earnings of 82 cents to 87 cents a share, well above recent Wall Street estimates averaging 76 cents.

“PeopleSoft is worth far more today than at any point since this process began,” said director George Battle, who heads a committee of outside directors evaluating bids for the company.