received tender offers for more than 60 percent of PeopleSoft's outstanding shares by Friday's midnight deadline. The weekend letter called for PeopleSoft's board to schedule a meeting to finalize a definitive merger agreement as soon as possible, with the goal of announcing a deal prior to Monday's market opening.
Instead, PeopleSoft snapped back with its own letter on Saturday. In that letter, PeopleSoft said that its board had unanimously rejected the latest offer on the grounds that it is "inadequate."
PeopleSoft's letter also said that, although more than 60 percent of shareholders had tendered stock, many of the shareholders who had tendered shares had expressed to PeopleSoft the opinion that the $24-per-share offer was too low. In essence, that means that shareholders want to keep the game going, to see if they can get a better deal than $24 per share.
In Oracle's Monday letter, Jeff Henley, chairman of Oracle's board of directors, wrote that Oracle still believes the "fair price" for PeopleSoft remains $21 per share and that Oracle doesn't understand how PeopleSoft reached the conclusion that the Pleasanton, Calif., software maker was worth more than the offered $24 per share.
Henley also wrote that PeopleSoft's new fiscal year 2005 guidance is "simply not credible.
"Just as your FY 2004 guidance was manufactured as a basis to oppose our previous offers—and was, in fact, not achieved—your new guidance is equally not credible and appears to be little more than an attempt to justify opposing our current offer," Henley said. "If one looks at independent consensus 2005 earnings estimates for PeopleSoft, $24 per share reflects a very generous premium relative to true earnings multiples."
Henley also said in the letter that, leading up to Nov. 19, trading volume in PeopleSoft's common stock was "uncharacteristically heavy." Based on Oracle's estimates, he said, as much as one third of PeopleSoft's stock—up to perhaps 125 million shares—was sold by long-term investors at prices ranging from $22.50 to $23.
"In other words, the best indication of actual shareholder sentiment is that nearly one-third of your company was actually sold—not merely tendered—at prices well below $24 per share," he said. "These shareholders sold into a market valuation created by the existence of our offer, not by your underlying fundamentals, and they sold at prices materially below $24 per share."
Most important, Henley went on to say, is the fact that more than 60 percent of shareholders tendered shares at $24, as opposed to opting for PeopleSoft's alternative plan of generating growth.
Where does this leave the deal? With a majority of shareholders on its side, Oracle stands in good stead to win a spring 2005 proxy battle and take over control of PeopleSoft's board. Once that's done and Oracle has a majority of sympathizers on PeopleSoft's board, the next step will be to vote to do away with the poison pill provision and a customer assurance plan.
Click here to read Database Editor Lisa Vaas' take on what Oracle's biggest priority should be, regardless of the success or failure of the takeover.
Those plans would cost Oracle billions more than its current bid were a successful acquisition to occur. Both the plans are now being contested in Delaware Chancery Court. A ruling is expected from Judge Leo Strine by the end of the month.
Many takeover watchers have expressed the opinion that the court case could well go against PeopleSoft, now that a majority of shareholders have sided with Oracle, proving that they do indeed favor some version of a takeover.
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