Oracle Ups Its Bid for PeopleSoft

Three weeks after Oracle Corp. Chief Executive Larry Ellison testified that he might lower a hostile bid for PeopleSoft Inc., Oracle raised it 14% and set a Nov. 19 deadline for its smaller rival to accept.

The bid made Monday is for $8.8 billion, or $24 a share, up from $7.7 billion, or $21 a share.

Executives at the Redwood City, Calif.-based software maker described it as their “best and final” offer. They said they would abandon the 17-month quest for Pleasanton, Calif.-based PeopleSoft if a majority of shares weren’t tendered by the deadline.

If, however, a majority are tendered and PeopleSoft maintains its anti-takeover defenses, Oracle said, it will keep fighting the provisions in the Delaware courts.

“We think the time has come for the shareholders of PeopleSoft to determine the outcome,” Oracle Chairman Jeff Henley said.

PeopleSoft shares jumped $2.16, or 10%, to $22.93. Oracle shares rose 9 cents to $12.75. Both trade on Nasdaq.

Analysts and investors said the new bid raised the likelihood that Oracle would win more than 50% of PeopleSoft’s shares, particularly because a federal judge ruled last summer that an acquisition wouldn’t violate antitrust laws.

“I’m fairly confident that most shareholders would be delighted to tender at $24,” said Steve Cohen, a PeopleSoft investor with hedge fund Kellner DiLeo Cohen & Co. in New York. “That represents nearly the highest amount they’ve been offered since this started.”

Far less clear is what PeopleSoft’s board will do. The board said Monday that it would consider the latest offer but gave no timetable. It has rejected all of Oracle’s previous offers -- including one at $26 a share, which was lowered after PeopleSoft reported disappointing results.

Best-known for its database programs, Oracle wants PeopleSoft’s business software to capture more of that market, in which Oracle has fared less well. The largest maker of such programs is SAP of Germany.

PeopleSoft has fought bitterly to fend off Oracle. Leading the charge was former Chief Executive Craig Conway, who worked at Oracle and was an Ellison protege before moving to PeopleSoft. Conway was ousted last month and replaced by company founder David Duffield, who said he did not return to PeopleSoft to sell it.

Since then, though, some members of the board have made conciliatory statements about Ellison and Oracle, saying they would entertain new offers.

Even if the board rejects the new deal, a majority tender would increase the pressure considerably. The vote “will determine whose side the shareholders are weighing in on and where the pressure lies,” said Piper Jaffray & Co. analyst Tad Piper.

Oracle said the latest offer was triggered by a request for negotiations from the judge weighing Oracle’s lawsuit to overturn PeopleSoft’s so-called poison-pill defense.

Although Ellison testified during the trial that he might lower the bid from $21, Henley said Delaware Chancery Court Judge Leo Strine Jr. asked Oracle to make its best offer in hopes of getting a peaceful resolution to the case before him.

The $24 price is higher than PeopleSoft stock has closed in a year and represents a substantial premium over its worth as a stand-alone firm, said Sanford C. Bernstein analyst Charles Di Bona. “We remain concerned that Oracle may be paying too much,” Di Bona wrote to clients.

Bernstein’s parent firm owns shares in both companies.