Business software maker Oracle Corp raised its hostile takeover bid for rival PeopleSoft Inc by 33 percent to US$26 per share on Wednesday, setting the stage for more high-stakes drama in the high-tech soap opera.
The all-cash offer, which values PeopleSoft at US$9.4 billion, tops Oracle's previous bid of US$19.50 per share. The new offer is a 19 percent premium from PeopleSoft's closing price on Tuesday.
Oracle is betting the new bid will win over PeopleSoft's major stockholders and pressure PeopleSoft's board to drop its staunch resistance to the offer, transforming what has been a hostile battle into friendly negotiation.
"This is our final price," Oracle chairman Jeff Henley said on Wednesday. "We urge PeopleSoft's directors to seriously consider our offer and put the interests of their stockholders first."
PeopleSoft's board will meet to review Oracle's revised bid and "make its recommendation to PeopleSoft stockholders in due course," company spokesman Steve Swasey said in a statement on Wednesday.
Oracle set a March 12 deadline for PeopleSoft stockholders to tender their shares. The shareholders will have another chance to take sides at PeopleSoft's March 25 annual meeting, where Oracle has nominated an alternative slate of directors to supplant four PeopleSoft incumbents.
PeopleSoft's board already has twice rejected Oracle since its suitor made its initial offer of US$16 per share in early June. Pleasanton-based PeopleSoft has consistently maintained it can become more valuable by capitalizing on its recently completed US$2 billion acquisition of J.D. Edwards & Co.
Redwood Shores-based Oracle, though, has depicted PeopleSoft as a struggling company destined to die unless it submits to a takeover.
The saga's final outcome may not be determined by Oracle or PeopleSoft.
The US Department of Justice (DOJ) is nearing the end of an extensive antitrust review of the deal, and it is unclear whether the administration of President George W. Bush will give the go-ahead for the takeover.
Oracle said on Wednesday that it expects the Justice Department to reach a decision by March 12.
Many investors believe the Justice Department will block Oracle's takeover plans, a threat that kept PeopleSoft's price from climbing closer to the revised US$26 bid, said industry analyst Tad Piper of Piper Jaffray.
Oracle argues a PeopleSoft takeover wouldn't hurt competition in the US$20 billion market for business applications software -- the computer coding used to automate a wide range of administrative jobs.
Even after a PeopleSoft takeover, Oracle would remain far smaller than the biggest business applications software maker, Germany's SAP. Oracle also contends the competition will become more intense as Microsoft, the world's largest software maker, continues a recent expansion into business applications.
PeopleSoft, though, has been lobbying the Bush administration to block Oracle, arguing that its nemesis intends to use the takeover as a springboard to higher prices and less product choices for customers.
Earlier this week, PeopleSoft used a full-page newspaper ad to make its case, warning a Oracle takeover will lead to higher consumer prices, higher college tuition and higher taxes as companies, universities and government agencies pass on their increased software costs.
"PeopleSoft's best ally at this point might not be shareholders, it might the DOJ," said industry analyst David Hilal of Friedman, Billings, Ramsey & Co.
"PeopleSoft really needs [regulators] to block this," he said.
European regulators also are conducting an antitrust review and a group of state attorneys general is mulling a possible challenge. The European review is scheduled to be completed by April 21.
The sweetened offer is the latest salvo in a Silicon Valley showdown that has pitted two of the software industry's fiercest rivals. The animosity has been punctuated by the barbed remarks of the two companies' outspoken chief executives, Oracle's Larry Ellison and his former subordinate, PeopleSoft's Craig Conway.
Conway is in line for a windfall if Oracle prevails.
Late last week, PeopleSoft signed a revised contract with Conway that enriched his severance package, or "golden parachute," according to a Securities and Exchange Commission filing. If Conway loses his job in a takeover, the package will award Conway more than US$60 million in cash, restricted stock and stock options, based on the value of Oracle's new offer.
If it's accepted, the higher bid will drain Oracle's bank account. The company had US$8.1 billion in cash as of Nov. 30, and a US$1.5 billion credit line.
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