"The board concluded that PeopleSoft is worth substantially more than Oracle's latest offer," Dave Duffield, PeopleSoft chief executive, said in a statement. "We are a vibrant, strong company with a focused, motivated management team and employee base dedicated to executing on the company's plan. PeopleSoft will continue to deliver shareholder value by extending our current product leadership, building new products, entering new markets and continuing to deliver the very best customer service in the industry."
PeopleSoft consulted with financial professionals at Citigroup Global Markets and Goldman Sachs on its decision to reject the offer, the company said.
The rejection by PeopleSoft's directors, which largely had been expected, will not have as great an effect on Oracle's perseverance as the shareholders' decision to accept the deal. They have until November 19 to tender their shares. Oracle has said it will walk away from the deal if less than 50 percent of the shares come to the table.
"After receiving an affirmative clearance decision from the European Commission, we submitted our best and final offer to the PeopleSoft board," Oracle chief executive Larry Ellison said in a statement."Oracle's board deliberated and concluded that the absolute maximum amount we were prepared to pay was US$24 a share. Beyond that, there are better uses of our capital including other acquisitions and repurchasing our own shares."
"Oracle has been at this for a year and a half, and it is now time to bring this matter to a close," Ellison continued in the statement. "On November 19, we will respect the will of the shareholders."
PeopleSoft's board, in rejecting the US$8.8 billion cash deal, asked shareholders to forego tendering their stock because they believe the company is worth more than Oracle's cash bid of US$24 a share. The total transaction is worth US$9.2 billion.
In fact, PeopleSoft's board believes the company is also worth more than Oracle's previous "best and final" offer of US$26 a share made last February.
PeopleSoft shares closed Thursday at US$22.79 and sank in after-hours trading to US$22.35.
The company noted that since the beginning of the year, it has generated US$422 million in license revenue and has added 418 new license customers. It also has increased its total deferred maintenance by approximately 9 percent and has generated US$248 million in incremental cash.
PeopleSoft said another reason it rejected Oracle's offer is that it expects to post "substantial sequential growth in license revenue and...earnings" in the fourth quarter.
The company also anticipates a strong fiscal 2005 due to its license revenue growth and a full year of revenue and cost savings from its recently completed merger with J.D. Edwards.
In addition, PeopleSoft took issue with the value Oracle placed on the deal as compared to other mergers in the enterprise software industry.
"Despite the strategic value of this transaction to Oracle, the offer price values the company at multiples far below those paid in comparable transactions in the enterprise software industry," PeopleSoft said in a statement.
Many industry watchers had speculated that PeopleSoft's board would reject the deal, given they had turned down Oracle's offer of US$26 a share in February. Oracle, which later lowered its offer to US$21 a share in May citing its rival's declining market price, said PeopleSoft's deteriorating condition did not warrant a higher price than the offer it issued earlier this month.
Oracle hopes to win over PeopleSoft shareholders as a means to put pressure on its rival's board of directors. The company is hoping a shareholder mandate will prompt PeopleSoft's board to waive its shareholder rights plan, otherwise known as a poison pill. Poison pills, if triggered, would flood the market with the shares of the takeover target, making it too costly for the rebuffed suitor to acquire those shares.
"PeopleSoft's shareholders now face a very simple decision," Oracle chairman Jeff Henley said in a statement. "They can accept our all-cash US$24 per share offer on November 19 or it will be withdrawn."
"We believe our offer represents a substantial premium over PeopleSoft's standalone value now or in the foreseeable future," Henley added. "We leave it to PeopleSoft's shareholders to decide whether PeopleSoft's current management can deliver better shareholder value now, or within any reasonable investment horizon."
Oracle recently concluded its trial in Delaware Chancery Court, where it was seeking to remove PeopleSoft's anti-takeover measures. Trial testimony had led some courtroom observers to speculate that PeopleSoft's position on an Oracle merger was softening, especially after the company had fired chief executive Craig Conway, who had remained adamantly opposed to the deal.
If Oracle's attempts to remove the poison pill fails, the company may opt to run its own slate of dissident directors, a step it had begun before federal antitrust regulators unsuccessfully launched a legal challenge to the deal.
The purpose of a dissident slate is to remove those directors up for re-election and replace them with candidates who would be more inclined to remove the poison pill. Hence, a merger could later ensue.
Should Oracle ultimately take this path, any resolution on whether a PeopleSoft merger will occur may not be known until sometime next year. That's when the software vendor holds its next annual shareholders meeting, stretching the proxy battle into nearly a two-year affair.
