Oracle Bid Runs Into New Hurdle
PeopleSoft Inc.’s largest shareholder said in a regulatory filing Tuesday that it would refrain from turning over its shares to Oracle Corp., dealing a blow to Oracle’s takeover campaign.
Private Capital Management of Naples, Fla., said it “currently intends” to keep its 9.3% stake when Oracle’s $8.8-billion tender offer for PeopleSoft shares expires Friday night.
Several major shareholders, including Capital Guardian Trust, said they did plan to tender their shares, which add up to about 8.5% of PeopleSoft’s total.
But “anytime you take 9% off the table, the odds get more difficult,” said Piper Jaffray & Co. analyst Tad Piper.
Oracle Chief Financial Officer Harry You has said he agreed with analysts who estimated that about 30% of PeopleSoft’s shares were beyond Oracle’s reach.
That includes 5.1% owned by PeopleSoft Chief Executive David Duffield, stock owned by other insiders and shares held by index funds and the individual investors who rarely participate in such disputes.
“The maximum practical percentage that we could achieve is about 70%,” You said Monday during a conference call sponsored by proxy advisor Glass Lewis & Co.
If each side now has 10%, You’s math means that Oracle now must induce 4 out every 5 persuadable shares to tender.
That could be an uphill battle.
If investors believe PeopleSoft’s recently increased profit projections, Oracle’s $24-a-share offer could easily be seen as too low, Piper said.
Most analysts haven’t professed much faith in the new profit forecast, but PeopleSoft is meeting with major shareholders to make its case.
Oracle declined to comment on its prospects. The software company might take solace from the fact that short-term speculators, who could own as much as 30% of the stock, are the most likely to tender for the immediate gains of Oracle’s bid.
Those investors and most institutions won’t turn in their documents until after the markets close Friday, in part because doing so earlier would mean they couldn’t sell in the open market.
Capital Guardian, which Oracle claimed Tuesday as a supporter, is part of Capital Group Cos. of Los Angeles. Other Capital Group firms, including Capital Research & Management, control an additional 11% of PeopleSoft’s shares.
Capital spokesman Chuck Freadhoff said the units were managed independently and had voted against one another in the past.
Executives on both sides of the 17-month struggle said investors who tendered their shares might not necessarily be content with Oracle’s “best and final offer.”
Paulson & Co. of New York said it intended to tender 9.1 million shares, or more than 2%, because that would preserve the investment firm’s options and signal to PeopleSoft that negotiations were in order.
If Oracle gets a majority of shares in the tender offer, PeopleSoft is expected to continue the fight in the courts and in a likely proxy battle for control of its board.
On Tuesday, shares of Pleasanton, Calif.-based PeopleSoft rose 20 cents to $22.74, and Redwood City, Calif.-based Oracle fell 9 cents to $12.92, both on Nasdaq.
