PeopleSoft fight ends with a phone call

Oracle's 18-month hostile takeover battle for PeopleSoft came to an end on Friday evening with a single phone call.

A PeopleSoft director, through an attorney, contacted Oracle with the lucky number: $26.50 per share, the price it would take to buy the software maker, Oracle President Chuck Phillips told CNET News.com on Monday.

Until that point, PeopleSoft had repeatedly rejected Oracle's bids, saying the various offers undervalued the company.

"Friday evening, an independent director, through an attorney, reached out to us," Phillips said. "It was the same director that said PeopleSoft would be open to a higher price than $24 and communicated to us the exact number."

The terse communication was the first time the two companies had negotiated directly on share price since Oracle began its hostile takeover bid in June 2003, people close to the deal said.

"This is the first communication we had from a PeopleSoft representative," said Michael Carroll, a partner at Davis, Polk & Wardwell who is representing Oracle.

Much of the final act in the long-running merger story played out in a Delaware courtroom, where Oracle was suing PeopleSoft to remove its antitakeover policy, otherwise known as a poison pill. But in the end there was little drama.

Some high-profile lawsuits, such as the Microsoft antitrust case brought by the Justice Department, are characterized by the constant buzz of backdoor negotiations that underlie courtroom maneuverings in public.

But the trial taking place in Delaware's Chancery Court ended unceremoniously Monday morning with a brief hearing featuring wisecracks from the presiding judge and holiday season well-wishes from a handful of adversaries turned instant allies.

That legal proceeding will be dropped as a result of the $10.3 billion merger.

The companies settled on the acquisition price and announced a merger on Monday morning.

Oracle was willing to offer $26.50 a share after reviewing PeopleSoft's financial books and finding that the company's maintenance business was more profitable than had been expected, Oracle executives said on Monday. Oracle had previously stated its bid of $24 a share was its "best and final" offer.

While both sides agreed on a share price, the weekend negotiations between the companies revealed other challenges. As the parties negotiated by phone, PeopleSoft executives pressed for conditions ranging from employee compensation to options and benefits, Phillips said.

PeopleSoft also wanted assurances that a deal could be reached and the merger completed relatively quickly.

PeopleSoft attorney Victor Lewkow, a partner at Cleary, Gottlieb, Steen & Hamilton who specializes in mergers and acquisitions, placed the call to Oracle, Carroll said. Lewkow phoned William Kelly, Carroll's colleague in Davis, Polk's Menlo Park office.

That kicked off a frenzied round of negotiations that stretched over the weekend. Accelerating the process was a nucleus of

people who had arrived early in Wilmington, Del., to prepare to testify in Monday's hearing. That group included PeopleSoft Chairman David Duffield and fellow board member A. George "Skip" Battle, chairman of the transactions committee.

One of the early contacts on Friday involved Battle reaching out to Donald Lucas, a prominent venture capitalist and chairman of Oracle's executive committee.

Once the board members realized that an agreement might happen, teams of lawyers--some also in Wilmington--scrambled to draft the paperwork. "At the same time the deal lawyers were starting to pound it out," Carroll said.

Even though some board members and their attorneys had gathered at the storied Hotel du Pont, which boasts a marble-and-tapestry lobby and meeting rooms decorated in French Neoclassic style, most of the people involved were scattered around the rest of the country and the details were worked out in a series of lengthy telephone conference calls.

By 7 p.m. PT on Sunday, it looked like a deal would happen. The negotiators phoned Judge Leo Strine, a vice chancellor in Delaware's Chancery Court who is overseeing the trial, to alert him that an agreement was in sight.

PeopleSoft's board signaled they would accept the $26.50 offer in a conference call that took place around 7 p.m. PT on Sunday. Oracle's board met afterward.

Strine said he was relieved that the trial would be brought to an abrupt close, and joked that "the threat of one of my notoriously long opinions is the principal reason" the deal happened.

Change in thinking?
Although PeopleSoft management could have named an asking price months ago, several events may have prompted Friday's call, Phillips said.

"I think the 60 percent we received in our tender offer prompted a major change in their thinking," Phillips said. "I also think the second phase of the Delaware trial, which was about to start, and its cost were an issue."

Last month, Oracle announced that more than 60 percent of PeopleSoft investors had tendered their shares when the offer price was $24. Oracle, which at the time said it needed at least 50 percent of shareholders to tender in order for it to pursue its takeover bid, later set a new deadline of Dec. 28 for PeopleSoft investors to tender.

Proxy experts, however, said at the time that more than 50 percent of PeopleSoft investors would likely tender their shares in order to keep the takeover battle alive--in the hope that Oracle would offer up a higher bid price as PeopleSoft's annual shareholders meeting neared.

PeopleSoft's stock hit a high of $24 per share on Friday. For Oracle, proxy solicitors said, it would be difficult to convince investors to sell their shares at a price that the stock was trading at in the market.

Phillips, however, said he does not believe the share price prompted PeopleSoft to come to the negotiating table.

PeopleSoft spokesman Steve Swasey declined to offer comment and directed questions on the deal to Oracle representatives.