Oracle May Learn Fate of Bid Tonight
After a campaign nearly as long and contentious as the presidential race -- and that could end up as close -- Oracle Corp. could find out tonight whether it has enough votes to proceed with its hostile bid for rival PeopleSoft Inc.
Oracle has said it would walk away from the 17-month battle if it failed to convince holders of at least half of PeopleSoft’s stock that its $24-a-share offer was a good deal. PeopleSoft’s board has said that the No. 2 supplier of business software applications could do better on its own than in a union with the world’s biggest database company.
PeopleSoft shareholders who want to accept Oracle’s offer have until 9 p.m. PST to deliver the necessary documents.
But the voting has been so close that the final result may not be known until Monday. On Thursday, CalPERS said it had tendered its 0.4% stake in PeopleSoft to Oracle, bringing the votes that shareholders have made public close to a dead heat.
Although PeopleSoft enjoyed a tactical head start -- about 30% of its shares are owned by insiders opposed to Oracle and by passive investors unlikely to vote -- the company warned employees Thursday not to be surprised if Oracle won this round. Several analysts predicted that it would.
“It seems likely Oracle will hit that threshold,” said Patrick McGurn of Institutional Shareholder Services, which advises investors during proxy fights.
If Oracle loses, it will mark the end of a Silicon Valley drama that combined a weighty debate about the future of software with the pettiness of schoolyard name-calling.
Executives at the Redwood City, Calif., company repeated promises this week that they would abandon their $8.8-billion quest if they didn’t get the necessary support from PeopleSoft shareholders. “Our board is unanimous on this point,” Oracle co-President Safra Catz told investors. “We will absolutely move on.”
If Oracle does emerge with a majority of PeopleSoft’s shares, it will press on. On Wednesday, a Delaware judge is scheduled to hear Oracle’s arguments for dismantling PeopleSoft’s “poison pill” anti-takeover defense. Analysts say the firm’s arguments would be strengthened by the backing of PeopleSoft investors.
Should that fail, Oracle has a Thanksgiving Day deadline for submitting a slate of four directors to run for PeopleSoft’s board. Analysts expect that the same investors who back the Oracle deal will lean toward electing the Oracle candidates, who would drop the poison pill.
In order to win that proxy fight, Pleasanton, Calif.-based PeopleSoft might have to meet some of the optimistic profit forecasts it made in the heat of battle last week. That could tempt executives to take actions that would hurt the company if it stayed independent, Sanford Bernstein & Co. analyst Charles Di Bona said.
Then again, such self-destruction would ease the sting for Oracle if it lost. Some critics have maintained that Oracle Chief Executive Larry Ellison was as interested in hurting PeopleSoft as he was in acquiring it.
Ellison has denied that. Oracle has sunk more than $90 million into fighting for the deal, including a successful monthlong trial challenging the Justice Department’s efforts to block the bid on antitrust grounds. If his main objective was to hurt PeopleSoft, Ellison testified, “It would be a colossal mistake to spend all this time and money.”
Personal enmity has also played a role in the duel. Ex-PeopleSoft CEO Craig Conway compared Ellison, his onetime mentor, to Genghis Khan, while Ellison joked about shooting his former protege. Conway was later fired for falsely reassuring analysts that the Oracle crisis wasn’t hurting sales.
Neither side has acquitted itself very well, analysts said. Ellison fanned speculation about his motives by initially offering too little for PeopleSoft, said David Hilal of Friedman, Billings, Ramsey & Co.
And if Ellison hadn’t panicked customers by saying he would stop selling PeopleSoft programs for managing human resources, accounting and other tasks, antitrust officials wouldn’t have been so concerned. Without the court fight, investors might have tendered their shares sooner, Hilal said.
PeopleSoft, on the other hand, never met Oracle to negotiate. Directors pursued a “just- say-no defense,” McGurn said, mouthing only enough interest in obtaining a better price to stave off intervention by the Delaware judge. They also filed an unfair business practices suit over Oracle’s tactics, a $1-billion case scheduled for trial early next year.
If the dust-up ends tonight, Oracle said, it will redouble its efforts to acquire other businesses.
Few companies would be as good a fit for Ellison’s strategy, which is based on the belief that the software industry is consolidating around distinct technology camps led by Microsoft Corp. and IBM Corp. Ellison wants to make sure Oracle emerges as the leader of a third camp; during the antitrust trial, he testified that he saw it as a matter of survival.
More immediately, success in the market for business applications software depends on standing up to industry leader SAP. And SAP has been the biggest beneficiary of the feud, as Oracle’s applications business has suffered during the fight.
“SAP wins no matter what happens,” said industry consultant George Gilbert of Tech Strategy Partners in San Francisco. “They will win bigger if the deal doesn’t happen.”
In Nasdaq trading Thursday, PeopleSoft shares gained 10 cents to $22.92, while Oracle fell 16 cents to $12.97.
