PeopleSoft: Shareholders Not Buying Oracle Offer

As a key deadline approaches, Oracle has extended its offer to buy shares of PeopleSoft stock for US$19.50 in cash. According to PeopleSoft, the move reflects the fact that just 11 percent of its shareholders have agreed so far to take part in the hostile, $6.3 billion takeover bid.

Redwood Shores, California-based Oracle said its offer, originally set to expire at midnight on July 7th, will remain valid until July 18th. As of the close of business on July 3rd, some 34.7 million shares had been tendered, according to the company.

Drop in the Bucket?

PeopleSoft, meanwhile, called the number of shares tendered in exchange for $19.50 in cash “underwhelming,” and said it supports the conclusion of its board of directors that the offer “undervalues the company and involves unacceptable risks.”

PeopleSoft also disclosed in a filing with the U.S. Securities and Exchange Commission (SEC) that it built automatic refunds into some recent contracts. Those refunds will take effect if an acquiring firm makes changes to PeopleSoft’s existing line of products or services within the next two years.

The refunds promise up to five times the value of some contracts and collectively are worth $354 million. The Pleasanton, California-based software firm previously had announced it would beat second-quarter forecasts in terms of both revenue and profits, but analysts noted that the value of the refunds, if redeemed, would almost completely eliminate the profits on PeopleSoft’s second-quarter balance sheet.

Playing Hard To Get

Oracle decried the move as an attempt to reduce the value of the company and prevent key insiders, who collectively hold millions of shares of PeopleSoft stock, from joining the tender offer.

“It’s another in a line of obstacles they’ve thrown up,” Oracle spokesperson Jim Finn told the E-Commerce Times. “We are continuing to move forward, however.”

Review Under Way

The announcements came at the end of a week that began with the U.S. Department of Justice seeking more information about how Oracle’s proposed merger with PeopleSoft would affect the software industry and consumers. That move, which triggers a more detailed investigation by the DOJ, was seen by many analysts as a reason for caution among PeopleSoft shareholders.

Finn said Oracle already has begun to cull the information being sought by the DOJ. He added that his company hopes the same level of review will be applied to PeopleSoft’s acquisition of J.D. Edwards. The deadline for the DOJ to seek more information in that case comes later this month.