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Oracle ups ante in PeopleSoft takeover bid

Oracle has sweetened its offer to PeopleSoft shareholders, announcing this morning that it would pay $19.50 per share.

Oracle Corp. has upped its offer for PeopleSoft Inc. to $19.50 per share, stoking the ire of PeopleSoft and J.D. Edwards & Co.

The Redwood Shores, Calif.-based database giant announced this morning that it is now prepared to pay about $6.3 billion for the enterprise application maker, up from its original offer of about $5.1 billion. The company's per-share offer represents a 29% premium over what PeopleSoft shares were trading for before the takeover bid. PeopleSoft shares were trading for $18.34 a share at 9:45 a.m. EDT this morning.

Additionally, Oracle is preparing to sue both PeopleSoft and J.D. Edwards to prevent the two companies' plan to eliminate the need for shareholder approval of their proposed merger.

Oracle's sweetening of the deal may come as a surprise to those who contend the takeover bid was merely a way to derail the proposed merger of PeopleSoft and J.D. Edwards, which was announced June 2.

Four days later, Oracle announced its intentions to buy PeopleSoft by offering investors $16 a share.

Oracle officials said during a teleconference today that they increased the offer after meeting with PeopleSoft shareholders during the last three business days. They are confident the new offer will be enough to get shareholders to bite.

"[Oracle's] initial bid was sort of testing the waters," said Chris Selland of Cambridge, Mass.-based Reservoir Partners. "Now they are showing the market they are serious."

The new bid might be enough to get the deal done, unless other potential bidders step up, Selland said. But Selland said that's unlikely to happen. Despite PeopleSoft's assurances that Oracle's hostile takeover bid will not succeed, Selland recommends that users hold off on purchasing PeopleSoft products until the outcome becomes more clear.

But the battle is going to be less about markets and more about courts, because a flurry of lawsuits have been filed. PeopleSoft is suing Oracle, alleging that the takeover bid disrupts the company's business by "creating uncertainty and doubt in the minds of PeopleSoft's customers and prospective customers."

J.D. Edwards has filed both federal and state lawsuits against Oracle. The company is seeking $1.7 billion in compensatory damages (the value of the PeopleSoft merger) and punitive damages. J.D. Edwards is also accusing Oracle CEO Larry Ellison and Oracle executive vice president Chuck Phillips of engaging in wrongful conduct and unfair business practices.

Both companies have asked the courts to issue an injunction to prevent the Oracle offer from going through. They have also thrown another roadblock in Oracle's way. PeopleSoft and J.D. Edwards announced this week that they were restructuring the merger agreement to a stock and cash combination, which would no longer require shareholder approval. Shareholders could opt for cash, stock or a mixed of the two.

Oracle this morning called this move a "poison pill."

"PeopleSoft's board of directors need to face up to their responsibility and get rid of the poison pill," said Jeff Henley, executive vice president and chief financial officer, during a teleconference Wednesday morning.

Some have accused Oracle of bullying PeopleSoft customers with such an aggressive takeover bid.

"Everyone recognizes it is a dynamic market. We think it is a good deal for PeopleSoft customers," said Robb Eklund, vice president of CRM product marketing at Oracle and a former PeopleSoft executive. "If you look at all the constituencies affected, it's a winning path for all of them."

Oracle emphasized this morning that the company will continue to support PeopleSoft products but would no longer sell them to new customers. Existing PeopleSoft customers would be able to buy additional seats on a limited basis. "We have no plans to eliminate PeopleSoft products. Period. We will not force customers to migrate to Oracle. Period," Phillips said this morning during a press conference.


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