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Oracle's Move Reaffirms Bid for PeopleSoft

Faced with a 'poison pill,' the company plans to launch a proxy fight to seek control of the takeover target's board.

November 25, 2003|Joseph Menn | Times Staff Writer

Oracle Corp. said Monday that it intended to nominate a slate of directors for takeover target PeopleSoft Inc. by late January, reaffirming its commitment to fight on multiple fronts for its proposed $7-billion acquisition.

European regulators last week opened a second phase of their antitrust inquiry that could last six months, but Oracle executives said during a conference call that analysts have been wrong to speculate that Oracle would abandon the bid.

"We are committed to pursuing the transaction, and we expected it to take time," said Chuck Phillips, executive vice president of the Redwood City, Calif.-based database giant.

Oracle faces several hurdles, including regulatory reviews by the U.S. Justice Department and the European Union as well as PeopleSoft's "poison pill" takeover defense, which is designed to make a hostile tender offer prohibitively expensive.

The most obvious way around the poison pill is to launch a proxy fight to elect new directors who would drop the defense.

Oracle said it would run a slate of candidates for the Pleasanton, Calif.-based business software maker's board of directors even if regulatory approval for the deal were still pending.

In resuming the aggressive rhetoric that marked the early days of the bid, Oracle suggested that one of PeopleSoft's moves to counter the proposed takeover left the company with a corporate governance problem, if not a regulatory problem.

To reassure nervous customers, PeopleSoft has promised refunds of as much as 500% if Oracle takes control and cancels support for PeopleSoft products. That has the potential to hurt PeopleSoft shareholders, Oracle executives said.

Oracle also said the possibility of having to pay refunds meant that PeopleSoft erred in booking uncertain revenue as definite. "From what we've read at least, we believe they have a revenue recognition problem," said Jeff Henley, Oracle's chief financial officer.

PeopleSoft disagreed. "We're confident that the revenue that is related to the contracts ... is recognized appropriately," said spokesman Steve Swasey.

Oracle also gave the impression that it had stiffened its resolve and would carry on -- presumably in a new court challenge -- even if it failed to convince regulators that the merger of software applications makers wouldn't harm competition.

"We are committed to seeing it through all the way to the end at this point," said Executive Vice President Safra Catz.

PeopleSoft shares gained $1.08 to $21.76 and Oracle rose 17 cents to $12.05, both on Nasdaq.

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