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PeopleSoft shareholders tender shares

A majority of PeopleSoft's shareholders met Oracle's Friday deadline to tender their shares. The long-running battle now hinges on the "poison pill" provision.

Oracle Corp.'s $9.2 billion takeover of rival PeopleSoft Inc. neared the finish line early Saturday morning when a majority of stockholders agreed to tender their PeopleSoft shares.

About 61% met Oracle's midnight deadline to tender their shares at a price of $24 each. Two weeks ago, Redwood Shores, Calif.-based Oracle issued its "best and final" offer. Oracle warned shareholders of Pleasanton, Calif.-based PeopleSoft that it would take the offer off the table and pursue other acquisitions if they did not tender their shares by midnight Friday.

Oracle extended its offer for the remaining PeopleSoft shares to Dec. 31 at 6 p.m. EST.

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Read about the PeopleSoft board's last refusal

"The owners of PeopleSoft have spoken and have overwhelmingly chosen to sell to Oracle at $24 per share," Larry Ellison, Oracle's CEO, said in a release. "We are prepared to enter into a definitive merger agreement as early as this weekend."

The final step in the long-running saga will be the resolution of PeopleSoft's "poison pill," an initiative to dilute the number of PeopleSoft shares in the event of a takeover and drive up the cost, as well as the customer assurance plan, a program promising new PeopleSoft customers a refund of up to five times their license costs. Oracle is seeking to have the "poison pill" and rebate program removed by the Delaware Court of Chancery. The "poison pill" allows the company to issue new shares if Oracle acquires the tendered shares.

In a letter to the PeopleSoft board of directors, Oracle called for a meeting over the weekend to finalize a merger agreement with a goal of announcing a deal before the market opens on Monday. Oracle also asked the board to remove the "poison pill."

If PeopleSoft does not remove the antitakeover measures, the struggle is expected to drag on for several more months as Oracle continues its legal challenges in Delaware or, failing there, via a proxy battle at the PeopleSoft's shareholders meeting in the spring where Oracle will nominate its own slate of new board members.

Again PeopleSoft spurned the offer.

Citing its growing installed base and maintenance revenue, A. George "Skip" Battle, chairman of PeopleSoft's transaction committee, wrote to Oracle that the company is worth more now than when Oracle made a $26 offer in February.

"Based on the numerous conversations we have had with our largest stockholders over the past 10 days, our board is convinced that a majority of our stockholders agree that your $24 offer is inadequate and does not reflect PeopleSoft's real value," Battle wrote. "This majority is comprised of stockholders who did not tender their shares, as well as stockholders who tendered but told us they believe PeopleSoft is worth more than $24 per share."

Oracle responded Monday morning with an open letter of its own. A fair price for PeopleSoft is $21 per share, but "in the spirit of resolving this long running matter for the good of PeopleSoft shareholders, customers and employees, we've raised our offer by $3 per share," wrote Jeff Henley, chairman of the Oracle board. Henley also questioned PeopleSoft's 2005 guidance, calling it "simply not credible."

Robert McWilliams, a partner specializing in mergers and acquisitions law at Chicago-based Freeborn & Peters, said those who did not tender are probably just looking for a better deal.

"At this stage, the only reason why someone might not tender -- if they thought it was a good price--was if they thought the board might be able to negotiate a few more dollars, not because the board has anything to do with it," McWilliams said.

The real winner in the longstanding battle may in fact be Germany's SAP AG. While Oracle and PeopleSoft bickered in court, in the press and on sales calls, their stock slipped. SAP's, on the other hand, rose.

The protracted and bitter 17-month battle has been marked by lawsuits, executives trading barbs and the firing of PeopleSoft CEO Craig Conway. On Thursday, PeopleSoft's current CEO Dave Duffield circulated an open letter to Oracle CEO Larry Ellison, threatening to sue the company if Oracle did not stop spreading "distortions" about Duffield's sales of stock. The stock was sold by a pet rescue foundation, which Duffield, a board member, had donated it to.

Already there are two outstanding lawsuits between the two companies. In addition to Oracle's suit in Delaware, PeopleSoft has sued Oracle for unfair business practices in Alameda County, Calif., and is seeking restitution and punitive damages.

"I can honestly say that I've never seen a company pursue another company in the face of such hurdles," McWilliams said. "It's rare for a company to continue saying no, no, no unless the offer is blatantly low-balled, and this one doesn't seem to be."

PeopleSoft customers have already experienced repeated highs and lows, as they waited to learn whether Oracle would prevail and its software discontinued. They waited through a lengthy trial when the U.S. Department of Justice sought to block the takeover on antitrust grounds, an action that ultimately failed. They waited as the European Union took its time before ultimately deciding not to block the deal itself. They waited as Oracle repeatedly raised and lowered its offer.

And now they must wait a little longer.

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