Oracle Corp. appears to be gagging on one of the poison pills introduced by rival PeopleSoft Inc., the company that it’s attempting to acquire in a US$7.3 billion hostile takeover bid.
Oracle Monday filed a request at the Delaware Chancery Court requesting an expedited ruling on its suit to block PeopleSoft’s antitakeover provisions. In particular, Oracle is pointing to the program PeopleSoft initiated that offers customers a refund of up to five times the cost of PeopleSoft’s software licenses should PeopleSoft be bought out in the next two years and the purchasing company drops support for the applications within four years. Recently, PeopleSoft amended the original refund offer, which triggered a new motion from some of its shareholders last week.
Oracle also offered an amended version of the poison pill suit Monday, along with the expedition request. Oracle is arguing in court documents that the refund program could make a takeover “prohibitive” not just for Oracle, but for any potential suitor. The liability incurred by this plan has already totaled US$800 million, according to public statements made by PeopleSoft.
Additionally, Oracle argued that these provisions would apply not just to a takeover by a third party, but by any transaction that changed PeopleSoft’s ownership. Oracle also claimed that the mechanism could be triggered if a majority of directors were elected over the next two years who were not approved by a majority of the incumbent board. This would frustrate Oracle’s stated plans to get their own slate of proacquisition directors elected next year.
“These and other provisions contained in the Revised Money Back Offer are so restrictive that no board could be assured that, through the exercise of any amount of care, they would not trigger them through the day to day exercise of their responsibility to manage the business and affairs of the company,” Oracle said in its filing. The net result of the money-back offer is that Oracle is “suffering direct and irreparable harm” and “may be forced to abandon its bid as it will no longer be economically reasonable,” according to the filing.
In a statement Tuesday, Oracle said, “PeopleSoft management’s entrenchment tactics continue to destroy the value of the company for its shareholders. We remain committed to completing the transaction.”
“Contrary to Oracle’s assertion, PeopleSoft’s management is acting in the best interest of the shareholders,” countered a PeopleSoft spokesperson. For instance, if Oracle were to buy out PeopleSoft, Oracle would be forced to support PeopleSoft’s products. If someone else bought out PeopleSoft and discontinued the line, the customers would get up to five times what they paid for the licenses, the spokesman said. “How anyone can say it’s not good for customers is a mystery to me. We think it’s very positive for customers and very positive for shareholders.”