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Oracle Exec To PeopleSoft: Come To The Table

Barbara Darrow

Unless and until PeopleSoft's "poison pill" provision is withdrawn, shareholders cannot really weigh in on Oracle's $19.50-per-share cash offer, Oracle Senior Vice President Chuck Phillips told reporters Friday afternoon.

PeopleSoft shares were trading around $17.49 at press time.

Oracle has talked with shareholders that, according to Phillips, hold roughly half of the outstanding PeopleSoft shares.

Since launching what started out as a $5.1 billion, or $16 per share, unsolicited buyout bid on June 6, Oracle has since sweetened the offer to $6.3 billion, or $19.50 per share.

"My initial offer was done based on a lot of valuation work based on cash flows [and other considerations]," Phillips said. "We don't look at it based on what we can afford to pay but on what we should pay, what it's worth."

Based on those calculations, Phillips said, Oracle came up with a starting point and took the deal to the market. "Normally what happens then is management from the target meet with you, and you negotiate and come up with middle ground," he said. "Since they won't meet, we went to the next [level]; we went to the owners. Management should negotiate on behalf of the owners, but now we're negotiating with the owners themselves."

"We need to get management to realize that shareholders have spoken to us [in favor of the deal]. Right now ... management refuses to do anything remotely in the interest of the owners," Phillips said.

At Oracle's investor road show this week, Phillips said the only issue raised by shareholders was price. Oracle had made its overture to PeopleSoft with a $16-per-share bid, "and at each meeting I'd ask what the right number is. All of them said $19 or $20 so we split it to get to $19.50," Phillips said.

Earlier Friday, PeopleSoft said its board had rejected Oracles' latest offer, saying it "undervalued" the company. PeopleSoft has indicated it is also proceeding with its $1.75 billion buyout of J.D. Edwards.

Should Oracle's plan succeed, Phillips said PeopleSoft integration partners should find more opportunities. "The partnering strategy should only be enhanced by this. The ecosystem will be a lot larger," he said.

Integrators will be able to keep maintaining and supporting existing PeopleSoft 7 and 8 installations. Phillips reiterated that Oracle will not force migrations to its own eBusiness Suite, but partners will play a role in any such migrations that occur.

Asked if shareholders had tendered their shares to pressure PeopleSoft management, Phillips said he was unsure.

"Probably very few shares have been tendered," he said. "It' s not really practical right now..the deal is contingent on the poison pill being removed. Until they do that, I wouldn't expect a lot of tenders."

Phillips said many PeopleSoft shareholders assumed from Oracle's raised offer that PeopleSoft management is negotiating, but that's not the case. "They haven't responded to us at all," he said.

Should PeopleSoft succeed in buying J.D. Edwards, that combination would thwart any Oracle bid, observers said.

"If Oracle can get a court to set aside the poison pill provision and give shareholders a vote, Oracle will succeed," said one Wall Street watcher, who requested anonymity. "The biggest poison pill may be if PeopleSoft can buy J.D. Edwards before the courts can move. That would deter anybody," he said.

PeopleSoft has maintained that J.D. Edwards will boost its profile in the small- and midsize-business market. But the company has struggled with profitability.

For more on this evolving story, go to CRN's PeopleSoft News Center.

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