March 2004, SOFTWARE GIANT ORACLE made a third unsolicited offer to buy PeopleSoft in what has been an aggressive eight-month campaign to acquire the human resources software pioneer. The latest bid of $9.4 billion, or $26 a share, was abruptly rejected by PeopleSoft's board five days after it was received on the grounds that it undervalued the company, despite being 8 percent over PeopleSoft's 52-week high of $24.04 in January.
"Oracle's offer does not begin to reflect the company's real value," said PeopleSoft CEO Craig Conway in a February 9 statement. "Don't underestimate the significant value PeopleSoft can create once the disruption from Oracle's hostile activities has ended."
Regardless of PeopleSoft's determination to keep Oracle at bay, the real control may not be in the hands of either company. In an ongoing investigation of Oracle's proposed deal, federal regulators are considering whether an acquisition would violate an titrust laws. On February 10, a team of Justice Department lawyers decided it would, and they recommended that the deal be blocked.
"The odds have definitely moved toward there not being a deal," says Tad Piper, an analyst with Piper Jaffray. "A recommendation to oppose the deal has already been sent up the chain. At this point, it seems fairly likely they'll oppose the transaction."
R. Hewitt Pate, the assistant attorney general in charge of the antitrust division, has said he would make a final decision by March 2.
One day after the recommendation at the Justice Department, Oracle CEO Lawrence Ellison didn't sound discouraged when he addressed investors at a conference in Santa Monica. "PeopleSoft has engaged in a very long and laborious lobbying effort with the Justice Department to persuade them that there are in fact antitrust problems with the merger of these companies," Ellison said. "We don't think that those arguments will prevail in the end."
If Pate does rule against Oracle's plans, the Justice Department is expected to file a lawsuit to block the deal. Ellison has said he would challenge such a ruling in court. If the Justice Department doesn't rule against the potential merger, PeopleSoft's March 25 annual meeting could seal the company's fate. Stockholders of the Pleasanton, California, company are scheduled to vote on whether to elect board candidates backed by Oracle, individuals likely to advocate the acquisition. Piper notes, however, that there may not be time between the federal ruling and the annual meeting to rally enough stockholders to support what is regarded as a fair but not quite irresistible bid.
Oracle, headquartered nearby in Redwood Shores, California, and IBM Corp. are the two major makers of database software. In recent years, Oracle has additionally been producing programs to handle employee salaries and benefits. These newer products compete directly with PeopleSoft's business software used to manage people, payroll and inventory. Oracle's argument is that the software market is broad and rapidly evolving, and that companies compete on many different levels.
Opponents of the merger are concerned that a combined Oracle-PeopleSoft would reduce the number of major suppliers of business-application software for large companies, leaving only two instead of three. Critics also fear that an Oracle takeover of PeopleSoft could devalue investments they have made in PeopleSoft's business software.
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By Gretchen Weber
"Oracle's offer does not begin to reflect the company's real value," said PeopleSoft CEO Craig Conway in a February 9 statement. "Don't underestimate the significant value PeopleSoft can create once the disruption from Oracle's hostile activities has ended."
Regardless of PeopleSoft's determination to keep Oracle at bay, the real control may not be in the hands of either company. In an ongoing investigation of Oracle's proposed deal, federal regulators are considering whether an acquisition would violate an titrust laws. On February 10, a team of Justice Department lawyers decided it would, and they recommended that the deal be blocked.
"The odds have definitely moved toward there not being a deal," says Tad Piper, an analyst with Piper Jaffray. "A recommendation to oppose the deal has already been sent up the chain. At this point, it seems fairly likely they'll oppose the transaction."
R. Hewitt Pate, the assistant attorney general in charge of the antitrust division, has said he would make a final decision by March 2.
One day after the recommendation at the Justice Department, Oracle CEO Lawrence Ellison didn't sound discouraged when he addressed investors at a conference in Santa Monica. "PeopleSoft has engaged in a very long and laborious lobbying effort with the Justice Department to persuade them that there are in fact antitrust problems with the merger of these companies," Ellison said. "We don't think that those arguments will prevail in the end."
If Pate does rule against Oracle's plans, the Justice Department is expected to file a lawsuit to block the deal. Ellison has said he would challenge such a ruling in court. If the Justice Department doesn't rule against the potential merger, PeopleSoft's March 25 annual meeting could seal the company's fate. Stockholders of the Pleasanton, California, company are scheduled to vote on whether to elect board candidates backed by Oracle, individuals likely to advocate the acquisition. Piper notes, however, that there may not be time between the federal ruling and the annual meeting to rally enough stockholders to support what is regarded as a fair but not quite irresistible bid.
Oracle, headquartered nearby in Redwood Shores, California, and IBM Corp. are the two major makers of database software. In recent years, Oracle has additionally been producing programs to handle employee salaries and benefits. These newer products compete directly with PeopleSoft's business software used to manage people, payroll and inventory. Oracle's argument is that the software market is broad and rapidly evolving, and that companies compete on many different levels.
Opponents of the merger are concerned that a combined Oracle-PeopleSoft would reduce the number of major suppliers of business-application software for large companies, leaving only two instead of three. Critics also fear that an Oracle takeover of PeopleSoft could devalue investments they have made in PeopleSoft's business software.
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By Gretchen Weber
