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PeopleSoft Shareholders Weigh In Before Oracle Deadline

By Fox News
Published | Updated

SAN FRANCISCO – Oracle Corp. (ORCL) Friday won the backing of another key public pension fund in its $8.8-billion hostile bid for PeopleSoft Inc. (PSFT) as the 17-month takeover battle between the two California-based business software makers neared a key deadline.

Analysts and investors have said in recent days they expected a majority of shares to be tendered to Oracle by the close of a Friday deadline.

Oracle has said it will withdraw its $24 per-share bid unless it gets a majority of shares tendered in support of its proposed takeover, which has already cleared antitrust scrutiny in the United States and the European Union.

PeopleSoft executives told employees in a Wednesday e-mail that they should "not be surprised" if a majority of PeopleSoft shareholders tender their stock to Oracle, which launched its tender offer in June 2003.

Even with a majority of shareholders tendering, Oracle will not move forward with the acquisition because of PeopleSoft's shareholder rights' plan, known as a "poison pill."

The poison pill allows the company to issue new shares if Oracle acquires the tendered shares. This would force Oracle to buy the newly-issued shares, making the acquisition more expensive.

Oracle has challenged the legality of the poison pill in a suit in Delaware.

New York state's pension fund, the nation's second largest, said Friday it had tendered its PeopleSoft stake, about half of 1 percent of all PeopleSoft shares, in support of Oracle's takeover bid for its longtime rival.

The fund's decision came a day after the California Public Employees' Retirement System (search), the nation's biggest pension fund, said it would also tender its PeopleSoft shares.

Both funds' investment decisions typically carry weight with other investors because they are seen as watchdogs for corporate governance.

Oracle on Friday said it would report preliminary results of its hostile tender offer as soon as possible after 1 a.m. EST Saturday following a final tally of the tendered shares.

Some analysts said PeopleSoft's board of directors could meet as early as Saturday to discuss removing the poison pill if a majority of shareholders tender their stock to Oracle. Those analysts note the board might only consider removing the pill if an overwhelming majority of shares are tendered.

PeopleSoft's board has refused to remove the pill, but Oracle hopes a majority-shareholder vote would pressure PeopleSoft's five independent board directors to remove the pill by out-voting the two "inside" board members, including PeopleSoft's CEO and founder Dave Duffield.

Oracle and PeopleSoft are scheduled to return on Nov. 24 to Delaware Chancery Court if the board still refuses to lift the pill in the face of a majority shareholder vote.

If Vice Chancellor Leo Strine upholds the pill, Oracle could mount a proxy fight by nominating new PeopleSoft board members who might be more favorable to a buy-out, thus dragging the battle into next year. Oracle holds a tiny amount of stock in PeopleSoft.

Four of PeopleSoft's seven board members will be up for re-election in the spring at the company's annual shareholder meeting, according to PeopleSoft spokesman Steve Swasey.

PeopleSoft stock rose 10 cents to $23.02 in late Nasdaq trading on Friday. Oracle shares fell 11 cents to $12.86.