Oracle raised its cash offer for PeopleSoft last week, presenting its rival's shareholders with a US$9.4 billion hostile takeover bid.
In citing its rejection of Oracle's revised bid, PeopleSoft on Monday said the company is currently trading at the low end of its historical valuation range, based on its forecast for future earnings. The company attributed the low valuation range to the uncertainty created by Oracle's bid.
"The board believes PeopleSoft has a better plan for stockholders. Oracle's offer does not begin to reflect the real value, including the value we are creating through our successful combination with J.D. Edwards," Craig Conway, chief executive of PeopleSoft, said in a statement. "We believe Oracle is using the entire process--tender offer, antitrust and proxy solicitation--in an attempt to damage our company. Don't underestimate the significant additional value PeopleSoft can create once the disruption from Oracle's hostile activities has ended."
PeopleSoft said that Wall Street analysts are predicting that its stock will reach US$26 a share in the next 12 months. According to Thomson First Call, analysts expected the company's share price to reach anywhere from US$15 to US$27 a share in the next 12 months, prior to Oracle raising its bid to US$26 a share.
Oracle's revised bid also values its competitor at a price below the current rate currently being paid in other large transactions in the enterprise software industry, PeopleSoft stated.
In response to its rejection by the board, Oracle appealed directly to investors in its rival, urging them to think carefully about PeopleSoft's earnings prospects if it remains independent.
"Since PeopleSoft's current directors persist in their refusal even to discuss the offer with Oracle, PeopleSoft stockholders can act in their own best interests by tendering their shares and voting to elect the slate of five independent directors to the PeopleSoft board," said Jim Finn, Oracle spokesman.
Although PeopleSoft's board has rejected the deal, investors may still force the issue by electing Oracle's slate of dissent directors. That would change control of the board and likely lead to PeopleSoft moving toward a friendly merger with its archrival.
A vote to elect PeopleSoft's directors will be held March 25, during the company's annual shareholders meeting.
Oracle, however, still has to receive regulatory approval to complete the merger, whether or not its slate of directors is elected. The company said it expects to hear from the U.S. Department of Justice by March 12 as to whether it will challenge its merger proposal.
The European Commission, the antitrust regulatory agency for the European Union, is expected to make its decision sometime after April. European regulators have delayed their review of the deal, as they await more information from Oracle.
In midday trading on the Nasdaq, shares of PeopleSoft were down 47 cents, or about 2 percent, to US$22.25, and Oracle shares were down 5 cents, or about 0.37 percent, to US$13.37.
