Original URL: http://www.theregister.co.uk/2004/12/13/oracle_peoplesoft_history/

The PeopleSoft vs. Oracle clash

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By Lucy Sherriff

Posted in Financial News, 13th December 2004 16:34 GMT

A Register History The tale of Oracle's attempt to buy Peoplesoft is a story of Larry Ellison's relentless pursuit of his target in the face of implacable hostility from the PeopleSoft board. The slanging matches between then-PeopleSoft-CEO Craig Conway and Oracle's Ellison were often spectacular.

Conway once described Oracle as a "sociopathic company", later having to deny that this meant he'd called Ellison a sociopath. A fine point, perhaps, but indicative of just how bitter and personal this fight became. Certainly here at The Register we mourn the passing of the greatest clashes of modern corporate times.

Timeline

It all kicked off on 6 June 2003, when Oracle ambushed PeopleSoft with a hostile takeover bid. The $5.1bn offer came just days after PeopleSoft agreed a $1.7bn deal with JD Edwards.

By 18 June, Oracle had upped this to $19.50 per share. PeopleSoft responded by sweetening its all-share deal with JD Edwards to include cash, in the hopes of closing more quickly. Along with JD Edwards, the company began legal action against Oracle, alleging Ellison and co. were deliberately disrupting the merger.

As part of its defence against being acquired, PeopleSoft pledged to give its customers between two to five times their license fees back, following a takeover. Things started looking even better for Conway when, as June came to an end, the US Department of Justice (DoJ) started an investigation to determine whether Oracle should be allowed to buy PeopleSoft.

On 18 July, PeopleSoft and JD Edwards completed their merger. By November, however, Oracle had gone on the offensive again. It initiated legal action in Delaware to get the so-called poison pill removed.

Antitrust

The antitrust case pitted Oracle against the DoJ. The Department finally filed a suit to block the deal (by this time worth a cool $9.4bn) in February 2004. It described the deal as "anti competitive, pure and simple". The European Commission agreed, and made its objections known in March 2004.

In April 2004, PeopleSoft reported lower than expected results, and by mid-May Oracle had dropped its offer from a high of $26 to $21 per share. PeopleSoft still wasn't interested.

Microsoft unexpectedly came to Larry Ellison's aid, when it emerged that the company had been seriously considering an acquisition of SAP. Oracle said this proved it was going to face tougher competition in the future, and that it should therefore be allowed to buy PeopleSoft. In his evidence, Ellison said that if the acquisition was blocked, it would have been a waste of a "tremendous amount of time and energy".

As the trial rumbled on, PeopleSoft announced another poor quarter on 7 July. It laid the blame for its falling sales squarely with Oracle.

Six weeks after hearing closing arguments in the antitrust trial, on 10 September, Judge Vaughn Walker handed Oracle a stunning victory. He ruled that the merger of Oracle and PeopleSoft would not be anti-competitive. PeopleSoft responded by giving its staff bigger and better severance packages, making itself an even more expensive proposition.

Europe says OK

In late September, rumours begin to circulate that the Eurocrats was preparing to green-light the merger. The Financial Times reported that competition commissioner Mario Monti would give the deal the go-ahead, before stepping down from his role.

Then, on 1 October, in a move that surprised everyone, the PeopleSoft board fired Conway. It has lost confidence in his leadership. The board later claimed Conway had misled analysts about the impact Oracle's bid would have on PeopleSoft's performance.

This effectively sounded the death knell for PeopleSoft's battle to remain un-Oracled, and any remaining doubters were silenced when, on 26 October, Commissioner Monti officially approved the merger.

However, PeopleSoft founder Dave Duffield proved no pushover. Despite a majority of shareholders voicing support for the offer, he rejected Oracle's "best and final" bid of $24 per share, saying it undervalued the company.

On the steps of the courthouse

On 25 November, Judge Leo Strine of the Delaware court said he needed to hear more evidence before ruling on the poison pills, specifically why PeopleSoft's board turned down the offer of $24 per share. He said the hearing would take place on 13 or 14 December. Meanwhile, Oracle maintained the legal pressure on its prey to drop the poison pills it had installed. It also pledged to "oversupport" PeopleSoft's customer base, dismissing suggestions that it would drop JD Edwards product lines. It promised to provide full support for PeopleSoft products until 2013.

But as the day of the new hearing dawned, the companies announced that they had come to terms, and the deal was done. Oracle eventually agreed to pay $26.50 per share for PeopleSoft. This values PeopleSoft at about $10.3bn: a ten per cent premium on the company's closing value.

In a statement issued this morning, the appropriately named PeopleSoft chairman, George Battle, described the fight for his company as "long and emotional". He said: "After careful consideration, we believe this revised offer provides good value for PeopleSoft stockholders and represents a substantial increase in value from October."

Both lawsuits have been suspended, and will be dropped when the merger is finalised, the companies said. Ellison said he expected the deal to close in January, adding that it would add about one cent per share to Oracle's Q4 results, and around two cents per quarter in its 2006 financial year. ®

The Oracle press release in full
The PeopleSoft press release

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