Oracle hikes PeopleSoft bid to $9.4 b

NEW YORK: Software provider Oracle Corp. raised its unsolicited takeover offer for PeopleSoft Inc. by a third to $9.4 billion, signaling its determination to win over PeopleSoft shareholders ahead of a key March vote.

Analysts said the new bid was compelling, and saw Oracle's bravado as a sign of confidence ahead of a crucial ruling from the U.S. Department of Justice on whether the deal would be anti-competitive.

"Oracle wouldn't have gone forward if it didn't believe it would get DOJ approval for the bid," said Summit Technology Partners analyst Richard Williams, a sentiment echoed by one source close to the deal.

"I think it's a testament about how good Oracle feels about where it is in the process," the source said. Oracle is "cautiously optimistic that it will come to a favorable resolution with the DOJ."

However, the market took a wait-and-see approach. Oracle, the world's No. 2 software maker, raised its offer for PeopleSoft to $26 per share from $19.50, as it seeks to create a business software maker to better compete with Germany's SAP and larger rival Microsoft Corp.

Yet, PeopleSoft shares closed more than $3 below that level at $22.70, as investors stayed skeptical ahead of the regulatory ruling. Redwood Shores, California-based Oracle, which said this was its final offer, expects a decision before March 12. Oracle shares closed down 64 cents, or 4.6 percent, at $13.27.

PeopleSoft, which has characterized Oracle's bid as a plot to eliminate a rival, said its board would meet to review the new offer, and asked its shareholders not to act on the latest bid.

SHAREHOLDER FIGHT BREWING

Oracle's decision to up the ante sets the stage for a potentially contentious shareholder battle at PeopleSoft's March 25 annual meeting, where Oracle and PeopleSoft management will fight to get their slates of directors elected.

"At $26 the bulk of the investor base would support it," said Marty Shagrin, a technology analyst at Victory Capital in Cleveland, Ohio. "This shows they are serious in acquiring the assets."

"The pressure on management to take a good hard look at this will be taken higher," Shagrin said. "Before it was easier to say no, but now they have to have a really compelling reason."

PeopleSoft shares have been trading above Oracle's previous offer price since early October. Oracle initially launched its bid for PeopleSoft in June with an offer of $16 per share, but PeopleSoft's board has unanimously rejected all of Oracle's advances.

"This is sort of the next step Oracle had to take. It's the best example of when buying votes is expected," said Tad Piper, an analyst at Piper Jaffray. "That doesn't change the fact that DOJ has not given its approval."

Oracle's offer is an 18.8 percent premium above PeopleSoft's closing price of $21.89 on the Nasdaq market on Tuesday, and an 8.2 percent premium above the company's 52-week high of $24.04 set last month.

SPEEDING UP THE PROCESS

In an attempt to install its own slate of directors to PeopleSoft's board and win control, Oracle has nominated five candidates of its choosing and has proposed expanding the board to nine members from eight.

Oracle said on Wednesday that it decided to present its new offer after PeopleSoft moved up its board meeting last week.

"The record date has been set at Feb. 10 ... and we wanted to put forward our final price prior to that time so that the PeopleSoft shareholders as of that date will fully understand their options," Oracle spokeswoman Jennifer Glass wrote in an email reply to questions.

But Oracle's increased bid and attempted board coup could yield nothing if antitrust regulators block the proposed deal.

Federal authorities have been probing the proposed takeover since an offer was first made, but have been mum on the process since making a second request for information in late June.

Published reports have suggested regulators are leaning toward blocking the bid, and some analysts agreed.

"We believe it is increasingly likely that the DOJ block the bid due to concerns about product tying and pricing leverage," JP Morgan analyst Adam Holt said.

(Additional reporting by Jeffrey Goldfarb, David Zielenziger and Wei Gu)

© Reuters