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PeopleSoft papers detail cost of Oracle bid

SEC filing reveals the money and resources it takes to keep Larry Ellison away.

PeopleSoft offered a glimpse at the price of blocking Oracle's hostile takeover bid in a regulatory filing Monday.

The yearlong effort to fend off Oracle's unwelcome attempt to buy PeopleSoft has not come cheaply for the business applications software vendor. Recently, that battle has been fought by Oracle and the Justice Department in an antitrust case in San Francisco. As the government and both software firms await the decision of U.S. District Court Judge Vaughn Walker, Peoplesoft says its costs continue to rise.

"We incurred over $70 million in investment banking, legal and other fees, and (devoted) a significant amount of internal resources to respond to the tender offer and the related lawsuits," PeopleSoft said in its filing with the Securities and Exchange Commission. The expense covers the period from June 2003, when Oracle announced its bid, to June 30 of this year.

Oracle spent $59.7 million on the PeopleSoft tender offer during its 2004 fiscal year, which began May 31, 2003. In its annual regulatory filing with the SEC, the database maker noted the cost of making the tender offer was one of three main contributors to the increase in general and administrative expenses for the year.

And the legal cost for both parties continues to mount.

Oracle, fighting to lift PeopleSoft's antitakeover "poison pill" policy, is scheduled to go to trial on Sept. 27 in the Delaware Chancery Court, according to PeopleSoft's regulatory filing. Regardless of a favorable ruling by Judge Walker, Oracle would still need to remove PeopleSoft's "poison pill," which makes a hostile bid cost-prohibitive by releasing more shares into the market.

Oracle also faces a lawsuit in Alameda County Superior Court, across the bay from San Francisco. PeopleSoft is alleging unfair business practices. That trial is scheduled to begin Nov. 1. And the European Commission, the antitrust regulatory body for the European Union, is reviewing the proposed acquisition, as well. A ruling by the Commission blocking the merger could also kill the deal.

PeopleSoft also disclosed in its regulatory filing that another defense against a takeover, its controversial customer assurance guarantee program could add another $2.02 billion to Oracle's cost to acquire the company.

The customer assurance guarantee program promises PeopleSoft customers that they will be paid upward of five times the cost of their software applications license if someone buys the company and discontinues or reduces support, licensing updates or new releases of PeopleSoft's products. Such payouts would cost Oracle billions of dollars.

PeopleSoft shareholders filed a lawsuit opposing the "poison pill," and later added opposition to the customer guarantee program. The company and its investors announced a settlement in late May that is still awaiting the judge's approval.