On Sunday, the database software giant and prospective PeopleSoft conqueror issued a letter of complaint to the takeover target's board of directors after that board refused to negotiate a deal between the two companies. That refusal came just hours after a majority ofto tender their shares to Oracle.
"We have received your response to our letter of Nov. 19, 2004, and we see it for what it is, a second rejection of our of $24 per share, yet this time with a repudiation of the choice nearly 61 percent of your shareholders have already made," Jeff Henley, Oracle chairman, said in the letter. "We are obviously at an impasse."
The shareholders' action is an important victory for Oracle in a merger bid now valued at $9.2 billion, but hardly the last word in a software industry saga that has been running for more than 17 months.
The two companies are still locked in a courtroom battle over an antitakeover provision, known as a poison pill, set up by PeopleSoft that could make it prohibitively expensive for Oracle to actually acquire the shares tendered to it. A hearing in that case is scheduled for Wednesday in.
Industry watchers and proxy solicitors see the companies heading toward a proxy fight in the spring, ahead of PeopleSoft's annual meeting, for which a formal date has yet to be set. If Oracle is able to get shareholders to elect a new board that is favorable to its cause, that board could remove the poison pill.
In its letter Sunday, Oracle called on PeopleSoft's current board to waive the pill, rather than await a decision by the Delaware court.
"As fiduciaries, the burden of bringing this matter to a close rests with you. There is no good reason to shift the burden of resolution from the board to the Chancery Court in Delaware. Likewise, there is no reason to shift the burden of resolution from the board to your shareholders through a protracted proxy battle next spring," Henley said.
Henley laid out five points for PeopleSoft's board to consider, ranging from the company's posture that it is worth more today than earlier in the year to the increasingly competitive landscape for enterprise business applications. He also called into question PeopleSoft's prospects for the coming months.
"It is nearly unanimous among financial analysts that your new (fiscal year) 2005 guidance is simply not credible," Henley said in his letter.
But the Oracle chairman cited the results from the tender offer as the most compelling reason for PeopleSoft's board to reconsider.
"More than 60 percent of your shareholders tendered their shares at $24. When faced with the actual choice between $24 per share and your alternative plan, your shareholders favored $24," he said in the letter.
PeopleSoft previously stated that many of its shareholders had indicated they would tender their shares even though they were.
Proxy solicitors say it's common in hostile takeover bids that shareholders of the target company tender their shares, even if they do not like the price being offered, as a means to keep the deal alive. Those investors are hoping that the prospective buyer will increase its offer just prior to the shareholders meeting, as a means to get the suitor's slate of directors elected.
On Monday, a representative of PeopleSoft said that company had no immediate comment on Henley's letter and that the board's renewed dismissal of Oracle's $24-a-share bid over the weekend "speaks for itself."