Oracle Corp. extended what it called its “best and final offer” for rival PeopleSoft Inc. on Monday, increasing its bid from US$21 a share to $24 a share and at the same time eliminating some of the conditions.
The Redwood Shores, Calif., enterprise software provider said the offer, which expires at midnight EST on Nov. 19, would be its last bid for PeopleSoft, potentially ending the 17-month takeover saga. Oracle said its fifth offer would value the acquisition at $9.2 billion (all figures U.S.).
In addition to offering the cash bid, Oracle said that it would develop and introduce a next generation of PeopleSoft products under the new offer — PeopleSoft 9 — and maintain an engineering organization at PeopleSoft’s Pleasanton, Calif., campus.
Oracle said that it’s dropping many conditions from its previous offer but keeping its demand that PeopleSoft’s board eliminate the so-called “poison pill” provision and related legal barriers. The provision is a mechanism in PeopleSoft’s bylaws that lets it inflate its number of outstanding shares, therefore dramatically increasing the cost of an acquisition. Oracle has challenged the legality of PeopleSoft’s poison pill in a Delaware Court, and a ruling is expected in coming weeks.
If over 50 per cent of the shares are tendered by its deadline, and PeopleSoft’s board annuls the poison pill, Oracle said it will complete the acquisition. If it does not receive 50 per cent of the shares, Oracle said it will withdraw its offer and walk away from the proposed buy.
However, if the company receives over 50 per cent of tendered shares and PeopleSoft’s board has not annulled the poison pill, Oracle said it would take the case to the Delaware Court for a decision.
“On November 19 we will see a resolution of this situation,” Oracle chairman Jeff Henley said during a conference call Monday. “We are presenting our best and final offer.”
PeopleSoft issued a statement in response Monday, urging its stockholders to take no action until its board meets to consider the amended offer. The board has already rejected four previous offers.
The $24 a share bid is a 60 per cent premium on the price of PeopleSoft’s stock prior to its offer, Oracle said. “We believe it represents a substantial premium to the price at which those shares would trade were it not for our offer,” Henley said.
The latest bid is below an earlier offer of $26 a share, however. Henley explained the reduction, saying that since the $26 bid PeopleSoft’s value has “degenerated” and Oracle has taken into account the cost of PeopleSoft’s “customer assurance program” (CAP). The program offers to compensate customers if PeopleSoft is bought by a company that disrupts its product development and support, and was introduced soon after Oracle’s initial bid in an effort to fend off the unsolicited acquisition.
The cost of the CAP has been factored into Oracle’s latest offer, Henley said.
Following the European Commission’s decision not to block the proposed takeover, and the U.S. Department of Justice’s failed bid to do so, Oracle called PeopleSoft’s board of directors its only obstacle to shareholders considering its offer.
“The time has come to bring this matter to a conclusion by allowing the stockholders to decide,” Oracle said in a letter to PeopleSoft’s shareholders sent on Sunday.