PeopleSoft rejects Oracle bid, deadline looms

Julie MacIntosh and Spencer Swartz

PHILADELPHIA/SAN FRANCISCO: PeopleSoft Inc.'s board again unanimously rejected Oracle Corp.'s $8.8-billion hostile tender offer, leaving Oracle to appeal directly to PeopleSoft shareholders to decide on the bid for themselves.

PeopleSoft's fate now turns on whether enough shareholders in favor of the proposed deal will tender their stock to Oracle by Nov. 19.

Oracle, which launched its takeover against its business software maker rival in June 2003, has said it will drop the takeover bid and focus on new acquisition prospects if less than half the shares are tendered.

But even if Oracle takes ownership of the majority of PeopleSoft shares, the battle could drag on until PeopleSoft's annual shareholder meeting next Spring if its board refuses to pull back a "poison pill" anti-takeover measure standing in Oracle's path, analysts and investors said.

"I'd be shocked if they don't get the tender," one PeopleSoft shareholder said. "But I think PeopleSoft won't redeem the pill, and this will go to a proxy battle."

PeopleSoft said its board concluded the company was worth "substantially more" than Oracle's latest offer of $24 per share, and the board recommended PeopleSoft stockholders not tender their shares to Oracle.

Some analysts have said PeopleSoft's value has diminished over the past several months as customers have delayed or withheld buying decisions.

Analysts point to Wall Street's sharply reduced full-year 2004 earnings estimates for PeopleSoft. Those estimates have come down roughly a third since the beginning of the year.

In announcing the board's decision, PeopleSoft underscored its confidence about the company's prospects by projecting full-year 2005 earnings-per-share well above current Wall Street analysts.

PEOPLESOFT 2005 OUTLOOK, NO TALK OF HIGHER PRICE

PeopleSoft projected 2005 earnings per share, excluding items, of $1.05 to $1.10 and net earnings per share in a range of 82 cents to 87 cents.

Analysts polled by Reuters Estimates had forecast full-year 2005 earnings per share, excluding items, of about 76 cents and net earnings per share of 62 cents.

Analysts said PeopleSoft executives would face an uphill battle in convincing investors not to tender their shares given market skepticism about whether the company's 2005 targets are attainable.

"PeopleSoft needs to more clearly articulate their plan. For much of the past year, PeopleSoft has been relatively quiet in its discussions on their future plans with shareholders and investors," said Piper Jaffray analyst Tad Piper, who does not own PeopleSoft or Oracle stock.

Oracle proffered its current $24 per share last week as its "best and final" bid.

Early this year, Oracle offered as much as $26 a share. Because PeopleSoft's board rebuffed that bid, many investors had expected PeopleSoft's board to reject Oracle's latest offer.

A. George Battle, chairman of PeopleSoft's Transaction Committee, told Reuters that PeopleSoft's board has not discussed what higher price would be acceptable.

Merger arbitragers in particular said they were watching shareholders like Capital Guardian Trust Co. and Capital Research & Management Co.

The two Capital Group companies owned almost 14 percent of PeopleSoft as of June 30 and could play a significant role in determining whether a majority of PeopleSoft shares are tendered in favor of the deal.

PeopleSoft shares closed at $22.79 on the Nasdaq, down 1 percent, and fell further to $22.45 in after-hours trading.