erpSOURCING Central - Oracle prevails in PeopleSoft tender

altquark writes "LOS ANGELES (CBS.MW) -- Oracle Corp. cleared a crucial hurdle Friday night in its $9.2 billion bid to take over PeopleSoft Inc., winning a clear majority of shares in its smaller rival following a direct appeal to investors.

Some 60 percent of PeopleSoft (PSFT: news, chart, profile) shares were tendered in favor of the $24-per-share offer, Oracle said in a statement released less than an hour after the deadline for accepting the bid expired.

For Oracle's outspoken chief executive, Larry Ellison, the outcome marks a major victory in his 17-month pursuit to acquire PeopleSoft, although the bitter battle isn't over just yet.

Oracle (ORCL: news, chart, profile) must now overcome PeopleSoft anti-takeover measures, including its "poison pill" plan. But experts said it appears only a matter of time before Ellison is able to close in for the kill now that investors have thrown their support behind in the controversial deal.

In letter to PeopleSoft's board, Oracle appealed for cooperation.

"We believe it is time to bring this matter to a close, for the good of PeopleSoft's shareholders, customers, and employees," Oracle said. "We are prepared to complete and pay for the acquisition of all outstanding shares of PeopleSoft upon satisfaction of the remaining conditions, which are all in your control."

Signs so far point to a possible proxy battle at PeopleSoft's next annual meeting in the spring.

The poison pill plan, an antitakeover measure commonly adopted by companies, would flood the market with PeopleSoft shares, effectively making an acquisition impossible to carry out.

Redwood Shores, Calif.-based Oracle had vowed to wash its hands of the deal, calling the current proposal its "best and final" offer, unless a majority of PeopleSoft shares were tendered in its favor by midnight Friday.

"I think it was a win-win for investors to tender in order to keep the bidding going," said William Lawlor, who leads the mergers and acquisitions group at the law firm of Dechert LLP in Philadelphia.

"It is a win-win because even if PeopleSoft shareholders want Oracle to cough up more, tendering by the deadline does not mean that's the end of the deal," Lawlor said. "Shareholders can always withdraw their shares after the deadline."

Court hearing set

Lawyers for the companies are due back in Delaware Chancery Court on Wednesday for a hearing in Oracle's lawsuit that seeks to invalidate PeopleSoft's poison pill and a customer-rebate program, which would trigger prohibitively high costs if the takeover occurs.

Most observers say it's unlikely the judge hearing Oracle's case will force PeopleSoft's board to remove the poison pill plan.

From the battle's start in June 2003, Pleasanton, Calif.-based PeopleSoft has vehemently opposed the takeover bid, and founder Dave Duffield isn't expected stop fighting now.

"I don't see them waving the white flag," Lawlor said. "They'll view the tender results as not being precisely a surrogate for a proxy contest and it's not. I think they'll continue the good fight."

Some legal experts, however, say such a strategy would be ill-advised after a majority of shares are tendered in favor of the proposal.

PeopleSoft has continually maintained that Oracle's offer, which once stood as high as $26 a share, has been too low.

Ahead of the tally, the market also appeared to be betting that Oracle would prevail, with PeopleSoft shares gaining 1 percent to close up 25 cents at $23.17. The stock's closing price was around 3.5 percent below Oracle's offer. Shares of Oracle fell 22 cents, or 1.7 percent, to close at $12.75.

Oracle has said it doesn't expect to trigger the rebate program, which could add up to $2.4 billion in extra liability to the deal if Oracle failed to support PeopleSoft products, because it intends to continue supporting them.

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