Sun, May 16, 2004 - Page 11 News List

Oracle cuts US$1.7bn off PeopleSoft bid

HOSTILE TAKEOVER As lawyers for the software maker Oracle square off against anti-trust regulators, the company said it would now pay only US$7.7 billion for PeopleSoft


Oracle announced on Friday that it was reducing its cash offer to acquire PeopleSoft to US$7.7 billion, from US$9.4 billion.

Oracle executives said the decision reflected the decline in the share price of PeopleSoft since it first announced its hostile takeover bid last June. Oracle said its new offer of US$21 a share for PeopleSoft represents a 21 percent premium over PeopleSoft's closing price on Friday of US$17.30. The earlier offer, made in February, was US$26 for each share of PeopleSoft.

Oracle announced the reduced offer after the close of regular trading. Shares of PeopleSoft fell to as low as US$16.90 in after-hours trading.

"Our revised offer reflects changes in market conditions and in PeopleSoft's market valuation," said Jeffrey Henley, Oracle's chairman and chief financial officer, in a statement. He noted that the new price was "a higher premium than our previous offer was on the date made, calculated on both a single-day and 30-day-moving-average basis."

Oracle's decision to lower its bid comes as lawyers for Oracle and the Justice Department prepare to square off in US District Court in San Francisco on June 7, after the agency's decision to sue to block the deal.

Federal antitrust regulators ruled in February that the merger would be anticompetitive, because it would reduce the market in business software makers from three major competitors to two, and would drive up prices. The trial is expected to last about six weeks.

If Oracle prevails in the legal case, the company will still need to persuade PeopleSoft shareholders to tender their shares and get approval for the merger from the PeopleSoft board.

Tad Piper, an analyst at Piper Jaffray & Co, said that the lower offer could make both those efforts considerably more difficult.

"It does represent, in some ways, less interest by Oracle in purchasing PeopleSoft," Piper said.

Also complicating a merger is PeopleSoft's customer rebate program, which has swelled in recent months to nearly US$2 billion. That program, announced last summer, says that in the event PeopleSoft is acquired, the acquiring company could be responsible for customer refunds up to five times the original value of the deal.

Oracle, based in Redwood Shores, California, offered PeopleSoft shareholders US$16 a share last June 6, but 12 days later raised the bid to US$19.50 a share. In February, the company raised its offer to US$26 a share.

Executives from PeopleSoft, based in Pleasanton, Calif., rejected every offer, calling Oracle's unsolicited bid a bad deal for PeopleSoft shareholders and accusing Oracle of trying to harm PeopleSoft's business.

PeopleSoft executives said the company would review Friday's offer, but stood by their belief that Oracle's takeover effort would ultimately fail.

"Given the significant amount of antitrust obstacles in both the United States and Europe, we do not believe Oracle's bid can be completed at any price," PeopleSoft said in statement.

PeopleSoft also said Oracle's timing of its announcement with the start of PeopleSoft's annual executive conference next week is further evidence of Oracle efforts to hurt PeopleSoft's business.

Oracle announced on Friday that it was extending the expiration date of its tender offer from June 25 to July 16.

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