Oracle turns up heat on PeopleSoft

Oracle Corp. yesterday upped its offer to buy PeopleSoft Inc. from the $16 a share it had offered to $19.50, for a total of about $6.3 billion, predicting that many reluctant shareholders will sell their stake in the company at the higher price.

Oracle chief executive officer Larry Ellison said in a statement that the offer increase came after Oracle spoke to PeopleSoft's major shareholders.

"Many of those shareholders indicated the prices at which they would tender their shares," he said. "Oracle remains committed to acquiring PeopleSoft and will not be deterred by management's maneuvers to maintain control of a company they do not own."

In increasing its offer, Oracle officials noted that $19.50 per share is a 20 percent premium over the price of PeopleSoft stock prior to the announcement of Oracle's first offer on June 6. PeopleSoft stock closed at $17.93 June 18.

When Oracle launched the takeover bid, which PeopleSoft CEO Craig Conway called "atrociously bad behavior from a company with a history of atrociously bad behavior," PeopleSoft had just begun negotiating to acquire J.D. Edwards & Co., an enterprise software developer serving the middle market.

That acquisition would make PeopleSoft a dominant player in large and mid-tier organizations, and some market analysts noted that Oracle's offer would disrupt PeopleSoft's business whether Oracle ultimately bought the company or not. However, PeopleSoft is still in talks with Edwards.

Oracle stated that if it acquired the company, it will discontinue selling PeopleSoft products. PeopleSoft's board of directors voted June 10 to recommend its shareholders reject the original bid.

In yesterday's announcement, Ellison said that Oracle would continue to support PeopleSoft customers. "Contrary to what PeopleSoft management would have you believe, Oracle intends to fully support PeopleSoft customers and products for many years to come," he said. "Satisfying those customers is the key to the success of this acquisition."

The negotiations have led to a pair of new lawsuits filed yesterday as well. Oracle is suing PeopleSoft, its board and J.D. Edwards & Co. for trying to block Oracle's takeover. PeopleSoft did not act in the best interests of its shareholders, Oracle alleges.

Meanwhile, the state of Connecticut today sued Oracle, asking a federal judge to block the takeover because it would allegedly violate Connecticut antitrust laws.

"Oracle's hostile takeover bid has the potential to cost the state millions of dollars and is a threat to the progress we have made in recent years in technology improvements" Gov. John Rowland said in a written statement "Connecticut has become a national leader using these new technologies in improving government efficiency and saving money. PeopleSoft has been key to the state's progress and this potential takeover could derail our gains and that is unacceptable."

Connecticut is overhauling its computer system, and holds a five-year contract with PeopleSoft for software. Comptroller Nancy Wyman said Oracle's planned takeover would create an "enormous and expensive upheaval" of the project.