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Oracle chokes on PeopleSoft's poison pill

Promised rebates may force Oracle to abandon bid

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Oracle may have to abandon its $7.3 billion hostile takeover bid for PeopleSoft because of the enterprise software firm's licensing-fee refund program.

In a filling to a Deleware Court, Oracle said PeopleSoft's promise to give its customers between two to five times their licensing fees back following a takeover could scupper its bid.

"If the PeopleSoft board is permitted to continue to issue self-serving, entrenchment-motivated contracts under the revised money-back offer, Oracle may be forced to abandon its bid as it will no longer be economically viable," the filing said, according to The Wall Street Journal.

PeopleSoft's revised refund program kicks in if the company is purchased within two years and support is reduced within four years. The potential liability under the new terms of its refund program stands at approximately $800 million, according to PeopleSoft.

Oracle wants the Delaware court to put through an injunction against PeopleSoft's new refund program. How much of its threat to abandon its bid is legal posturing is therefore open to question.

A minority of PeopleSoft shareholders are also asking the courts to block PeopleSoft's controversial program, however the besieged enterprise apps vendor is holding firm.

A PeopleSoft spokesman told the Wall Street Journal that the plan is "good for customers, and ultimately good for shareholders." ®

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