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Oracle pitches merger to PeopleSoft shareholders

The software maker sends letters to all its rival's shareholders, urging them to tender their shares to Oracle by mid-March and elect Oracle's nominees to PeopleSoft's board next month.

Oracle sent letters to all PeopleSoft shareholders Tuesday, urging them to tender their shares to Oracle by mid-March and elect Oracle's nominees to PeopleSoft's board next month.

The letters, signed by Oracle Chief Executive Larry Ellison and Oracle Chairman Jeff Henley, are a direct appeal to shareholders on a proposal that has been repeatedly shot down by PeopleSoft management. The $9.4 billion bid also appears headed for rejection by U.S. antitrust authorities.

"The pattern of conduct by (PeopleSoft Chief Executive) Mr. (Craig) Conway and his Board of Directors over the past eight months and their evident lack of concern for stockholder rights have left us with no choice but to take this matter directly to you--the true owners of PeopleSoft," the letter states.

Oracle, which launched the contested bid last June, still faces several deal-busting hurdles. One is a final ruling from the U.S. Department of Justice on whether the merger of the second and third largest suppliers of business application software--PeopleSoft and Oracle, respectively--would harm competition. A final decision on the all-cash, $26-per-share bid is expected within the next two weeks.

Although the agency's staff has advised the assistant attorney general to block the deal, Oracle remains confident it can sway the decision its way. Ellison has also indicated he's willing to challenge an unfavorable ruling. "We believe that our offer will ultimately be allowed to proceed," Oracle stated in the shareholder letter.

The letter indicates that Oracle is keeping its sights trained on another major showdown--PeopleSoft's annual shareholder meeting on March 25. The company is asking shareholders to expand PeopleSoft's eight-seat board to nine seats and elect five candidates that Oracle has nominated for a PeopleSoft board election. But a regulatory roadblock is likely to sap shareholder enthusiasm for that plan.

With the cards increasingly stacked against the deal, Oracle's letter seems designed to rally the support of the shareholder community by inciting a sense of injustice. It attacks PeopleSoft management for disregarding their best interests and for inventing "schemes to further entrench and enrich themselves at your (shareholders') expense."

Among the list of PeopleSoft management's alleged sins outlined in the letter are a $60 billion "golden parachute" severance packaged awarded to Conway by the PeopleSoft board; a campaign to misinform PeopleSoft customers about Oracle's takeover intentions; and a customer refund program that could add as much as $1.5 billion the cost of any acquisition of PeopleSoft.

PeopleSoft's directors have also ignored Oracle's requests to meet, according to the letter.

Oracle plans to send PeopleSoft's shareholders proxy materials to elect its replacement slate of directors and amended materials on it tender offer, which expires March 12, the letter stated.