The Oracle Corp hostile takeover bid for PeopleSoft, its rival in the market for business software, took an unusual turn on Tuesday when a PeopleSoft director testified in a Delaware courtroom that he would be open to discussions about a merger.
Steven Goldby, who heads the PeopleSoft board's transaction committee, which is charged with considering Oracle's US$7.7 billion tender offer, said that "if there had been -- and if there ever is an indication that Oracle is willing to pay what we consider to be the right price for the shareholders to get for this company, and there is a high certainty of being able to close the transaction quickly, I, personally, would be open to discussions with Oracle."
PeopleSoft executives, how-ever, moved quickly to say that the company remains opposed to Oracle's bid.
Both companies make software that links back-office programs and databases to handle such tasks as accounting, human resources management and supply chain management.
"One could argue that PeopleSoft is sending mixed signals," said Lynn Stout, a corporate law professor at the University of California, Los Angeles.
Stout said that PeopleSoft's directors may not want to appear unwilling to consider Oracle's offers because that could expose them to shareholder lawsuits. But at the same time, she said, the board may want to maintain its bargaining position by rejecting the offer as being too low.
Goldby's testimony came on the second day of a Delaware trial in which Oracle is attempting to force PeopleSoft to remove its anti-takeover measures, a "poison pill" provision that would make purchasing a majority of the company's stock prohibitively expensive and a customer rebate program that could leave Oracle with a US$2 billion bill.
Removing those measures would allow Oracle to proceed with its tender offer. PeopleSoft denied that Goldby's testimony indicated the company had changed its position on the merger.
Since Oracle's first bid in June last year, PeopleSoft executives have said that Oracle's offer undervalued the company and was likely to be bogged down in antitrust scrutiny.
But the antitrust objection was removed when a federal court ruled in September that it would not block the deal on anticompetitive grounds, and the Justice Department announced last week that it would not appeal the decision. The primary objection to a merger now appears to be price.
"The board's position is and has always been that it will do what's in the best interest of PeopleSoft's stockholders," said Steve Swasey, PeopleSoft's director of corporate communications. "Mr. Goldby's testimony this morning is consistent with the board's position all along."
Swasey said that the PeopleSoft board had met more than 80 times in the past 16 months to discuss Oracle's tender offer.
"Each time they've rejected the bid primarily because it undervalues the company," he said.
The current offer stands at US$21 a share, which PeopleSoft rejected as too low. The board also rejected Oracle's offer of US$26 a share in February as undervaluing the company. As recently as last Friday, A. George Battle, a PeopleSoft director, said the company remained committed to winning the Delaware trial.
Still, Goldby's testimony, coming after the firing of PeopleSoft's chief executive, Craig A. Conway, on Friday further fueled speculation that PeopleSoft is softening its opposition to the merger.
RSS