PeopleSoft Again Rejects $8.8-Billion Offer by Oracle

PeopleSoft Inc. on Saturday rejected Oracle Corp.’s proposal to acquire it for $8.8 billion, just hours after Oracle announced that it had won majority support for the deal from PeopleSoft’s shareholders.

PeopleSoft, based in Pleasanton, Calif., said that despite Oracle’s announcement, it did not believe most of its investors would be satisfied with the price.

“The board believes that a majority of our stockholders agree that Oracle’s $24 offer is inadequate and does not reflect PeopleSoft’s real value,” the company said after its directors met.

PeopleSoft had previously rejected a $24-a-share bid. But Oracle had to make another offer to set the stage for a Wednesday court hearing. It will ask a Delaware judge to strike down PeopleSoft’s anti-takeover, or “poison pill,” defense that makes a hostile acquisition prohibitively expensive.

Late Friday, Oracle said investors holding about 60% of PeopleSoft’s stock had tendered their shares before the offer expired at midnight EST. Oracle said it would extend the offer to Dec. 31, so PeopleSoft investors were free to change their minds and ask for their shares back.

At least some shareholders said they hoped that by giving Oracle a majority, the two sides would negotiate a higher price. Oracle, based in Redwood City, Calif., had said it would walk away if it didn’t get a majority.

PeopleSoft said that based on conversations with its largest investors, the 40% who didn’t tender shares to Oracle and those who tendered only to keep the 17-month campaign going comprised a majority. Analyst Charles Di Bona of Sanford C. Bernstein & Co. said there was no way to know whether the statement was accurate.

Oracle declined to comment.

The Silicon Valley fight is unusual for the software industry, which rarely sees hostile takeovers. Oracle, which primarily sells databases for storing corporate data, wants to add PeopleSoft’s programs for managing payroll and other tasks to compete better with SAP, IBM Corp. and Microsoft Corp.

If Oracle doesn’t get PeopleSoft’s anti-takeover defense stricken, its next best chance to close the deal would be to nominate its own candidates for the board of directors, who could take control of PeopleSoft at the annual meeting likely to be held in March or April.

PeopleSoft hopes that before then it will perform so well that investors will think $24 a share isn’t enough.

“We are confident that in the time leading to our 2005 annual meeting, we will continue to demonstrate PeopleSoft’s superior value to our stockholders,” said director George Battle.

That strategy could work, analysts said Saturday.

“If they can in fact hold out and be able to put up a successful December quarter, I think Oracle will have to pay more in order to ultimately consummate a deal,” said Tad Piper, analyst at Piper Jaffray & Co.

But as for whether PeopleSoft can report the profit necessary to turn the tide, Piper said, “the skepticism is pretty high.”