Soon after an Oracle director said Oracle's current $21
(£11.78) per share offer for control of PeopleSoft may not be its
final bid, Oracle CEO Larry Ellison countered that the company is
as likely to lower its bid as to raise it.
Oracle has done that before - in May, it reduced its all-cash
offer from $26, citing changing market conditions and what it saw
as PeopleSoft's deteriorating value. The change cut the price
Oracle would pay from $9.4bn to $7.7bn.
Ellison's comments came in Delaware Chancery Court, where Oracle
is trying to persuade a judge to eliminate several PeopleSoft
provisions that could block Oracle's hostile takeover plans.
While buying PeopleSoft is "very, very important for Oracle's
future," the company has had "more discussions about lowering the
price than raising the price", Ellison said.
Ellison reportedly said he had considered buying PeopleSoft for
several years, and expected PeopleSoft would quickly accede to
Oracle's takeover plan. Instead, the saga has dragged on for 16
months, generating anti-trust investigations in the US and Europe
and sparking a number of lawsuits between PeopleSoft, Oracle and
associated parties.
The previous merger discussions between Oracle and PeopleSoft
have been a recurring issue at the Delaware trial.
In June 2002, one year before Oracle initiated its tender offer
to PeopleSoft shareholders, PeopleSoft's then-CEO, Craig Conway,
called Ellison to inquire about combining their companies'
applications businesses. The two sides differ on the terms
initially discussed: Conway said he asked Ellison if Oracle would
sell its applications business to PeopleSoft, while Oracle says
Conway proposed merging the businesses.
Either way, the two companies agree the talks ended a day or so
later as both suppliers believed their applications should be the
surviving product set.
The sincerity of Oracle's offer to buy PeopleSoft is another
running theme at the trial. PeopleSoft has always been on the list
of companies Oracle has evaluated as acquisition targets, Ellison
argued.
Earlier at the trial, Conway - who was fired from PeopleSoft
last week - acknowledged that when he first learned of Oracle's
offer, he considered it a hoax or a malicious tactic aimed at
destabilising PeopleSoft. Pressed by Oracle's attorney, he still
resisted classifying Oracle's bid as a legitimate one, according to
a transcript of the proceeding.
"Oracle didn't go away, right?" Oracle counsel Michael Carroll
asked. "It wasn't a hoax and a circus act, correct?"
"They didn't go away," Conway answered.
Oracle's motivation for its acquisition attempt will be a
central issue at the next court case on the PeopleSoft/Oracle
roster, a trial in California's Alameda County Superior Court
scheduled to begin in November. That case will focus on
PeopleSoft's allegation that Oracle has employed unfair business
practices in competing against PeopleSoft.
The Delaware case is expected to continue for the rest of the
week. If Oracle succeeds in persuading the court to lift
PeopleSoft's "poison pill" anti-takeover provision - an unlikely
outcome, according to legal experts - PeopleSoft's shareholders
would be free to accept Oracle's tender offer without the
cooperation of PeopleSoft's board.
If the provision stands, Oracle would need the consent of
PeopleSoft's board to complete its takeover.
Financial analysts expect that Oracle will have to increase its
bid to win over PeopleSoft's board. The industry consensus is that
Oracle will need to offer $23 or $24 per share to advance its bid,
said Chris Kwak, of the Susquehanna Financial Group in New York,
said.
As of Thursday, Oracle had 11.7 million PeopleSoft shares
validly tendered into its offer, about 3% of PeopleSoft's
outstanding total. That number is down from the 23.8 million shares
tendered into the offer in late September, but the total would
likely rise again if shareholders thought PeopleSoft's board would
clear the deal.
Stacy
Cowley writes for IDG News Service