PeopleSoft balks at Oracle takeover bid

PeopleSoft CEO Craig Conway came out strongly against the surprise hostile takeover bid launched by Oracle on Friday, calling it "atrociously bad behavior."

The offer is nothing but a competitive strike to disrupt the acquisition of J.D. Edwards announced by PeopleSoft just a few days ago, Conway said in a statement.

PeopleSoft and its board of directors will review the Oracle offer and will provide a recommendation to shareholders, the company said. In the meantime, PeopleSoft advises its shareholders to take no immediate action.

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PeopleSoft CEO Craig Conway came out strongly against the surprise hostile takeover bid launched by Oracle on Friday, calling it "atrociously bad behavior."

The offer is nothing but a competitive strike to disrupt the acquisition of J.D. Edwards announced by PeopleSoft just a few days ago, Conway said in a statement.

PeopleSoft and its board of directors will review the Oracle offer and will provide a recommendation to shareholders, the company said. In the meantime, PeopleSoft advises its shareholders to take no immediate action.

PeopleSoft's board is planning to meet this weekend, a PeopleSoft spokeswoman said. She would not say if Oracle CEO Larry Ellison has been invited to that meeting.

Ellison in an interview on CNBC prior to Conway's remarks said Conway was the first to bring up a merger between PeopleSoft and Oracle about a year ago.

"Craig Conway, the CEO of PeopleSoft, called me on the phone about a year ago and said he wanted to put the two applications businesses together. It really was their idea to choose us as a partner in the applications space," Ellison said. "We couldn't agree on structure and we couldn't agree on price back then, so we now made an alternative and decided to go directly to PeopleSoft shareholders."

Prior to joining PeopleSoft in May 1999, Conway had spent eight years at Oracle as executive vice president of marketing, sales, and operations, according to PeopleSoft's Web site.

Oracle is offering $5.1 billion cash, or $16 per share, to acquire PeopleSoft. Oracle plans to stop selling PeopleSoft products to new users, but continue support for current users while encouraging those users to switch to Oracle's applications.

Industry analysts say PeopleSoft users are in for a rough transition if the takeover happens.

PeopleSoft, like many large U.S. companies has measures in place to prevent a hostile takeover. This includes a shareholder rights plan known as a "poison pill" that will increase the price of acquiring the company's shares to a prohibitive level when a takeover bid is launched, financial analysts said Friday.

Oracle might choke on this poison pill, or at least will be forced to raise its offer from the $16 per PeopleSoft share announced Friday, said Richard Petersen, an analyst at financial services firm WR Hambrecht in San Francisco.

"Unless PeopleSoft wants to be acquired, they won't be. There is no such thing as a hostile takeover here; it can't happen," he said. "I think odds are against this transaction being completed."

However, Brendan Barnicle, senior research analyst at investment bank Pacific Crest Securities in Portland, Ore., said PeopleSoft's poison pill is not hard to disgorge. If Oracle gets the backing of 51% of PeopleSoft shareholders, the issue is off the table because of an "action by consent clause," he said.

"There is always a poison pill issue, but this clause will make it easier to resolve than in other companies," Barnicle said.

Besides the poison pill issue, financial analysts agree that Oracle's cash offer of $16 per share for a total of $5.1 billion won't be enough.

The IDG News Service is a Network World affiliate.