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Oracle's second attempt to acquire PeopleSoft fails

"Oracle's offer undervalues the company and is not in the best interest of PeopleSoft's stockholders."

Craig Conway, PeopleSoft president and chief executive

Software group PeopleSoft's board voted unanimously Friday to reject an improved, 6.3-billion-dollar takeover from its bigger, bitter rival Oracle Corp.

The rejection was the latest chapter in the unprecedented hostile takeover battle that has roiled Silicon Valley.

"The board concluded that the proposed combination of PeopleSoft and Oracle faces substantial regulatory delays and a significant likelihood that the transaction would be prohibited," PeopleSoft said in a statement.

"Those delays and uncertainties, combined with Oracle's stated intentions to discontinue PeopleSoft's products, would subject PeopleSoft's business to irreparable damage," the statement said.

The Oracle offer failed to match the full value of PeopleSoft, based on its financial performance and future prospects, it said.

The board said it was acting on a recommendation from a committee of independent directors.

"Oracle's offer undervalues the company and is not in the best interest of PeopleSoft stockholders," PeopleSoft president and chief executive Craig Conway said. "It is highly conditional, faces significant regulatory delays and uncertainty, and threatens serious damage to our business."

Oracle chairman Larry Ellison, in a statement Friday, tried to allay concerns of PeopleSoft and its customers.

"PeopleSoft executives are traveling around telling customers that we will `kill' PeopleSoft's products and force them to move to Oracle's applications," Ellison said.

"These are lies and scare tactics. We will continue to develop and improve PeopleSoft's products for at least the next 10 years -- even longer, if customers require further support. We will have more than 4,000 engineers supporting PeopleSoft customers all over the world, and they can stay on PeopleSoft applications or migrate to Oracle applications at their discretion. It's entirely their choice."

Oracle launched the surprise bid after PeopleSoft had announced plans for a 1.75-billion-dollar friendly bid for its smaller rival, JD Edwards.

"PeopleSoft is committed to the JD Edwards acquisition," Conway said. "We believe that the continued execution of our strategy will create significantly higher stockholder value."

PeopleSoft has described the Oracle bid as a sham aimed at scuppering its own merger plans.

In reaction, PeopleSoft this week revised its offer for JD Edwards, adding a cash component to the terms of its deal in hopes of avoiding a shareholder vote and closing the merger more quickly.

PeopleSoft has been scrambling for shares of rival JD Edwards in an effort to close that deal before Oracle can persuade PeopleSoft shareholders to sell.

The group said its merger with JD Edwards would lead to US$150 million to US$200 million -- or US$0.23 to US$0.30 a share -- in cost savings and revenue opportunities.

PeopleSoft shares dropped US$0.19 or 1.08 percent to US$17.42, Oracle fell US$0.41 or 3.08 percent to US$12.93 and JD Edwards dropped a penny to 14.02 dollars.

Oracle announced this week it would sue PeopleSoft, accusing its board of failing to act in the shareholders' best interests and demanding it remove a "poison pill" provision threatening its bid.

PeopleSoft and JD Edwards have both sued Oracle.

Oracle and PeopleSoft are battling for the number two spot behind German software giant SAP in the US$14 billion market for software that companies use to manage accounting, payroll and other functions.
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