PeopleSoft board rejects Oracle bid

PeopleSoft Inc.'s board of directors voted unanimously to recommend that stockholders reject an unsolicited offer from Oracle Corp.

Oracle's offer, $16 a share, would total about $5.1 billion.

The hostile takeover bid came as PeopleSoft was negotiating to acquire J.D. Edwards & Co., an enterprise software developer serving the middle market. That acquisition would make PeopleSoft a dominant player in large and mid-tier organizations.

Analysts have said that Oracle's surprise offer would create doubt among PeopleSoft customers, disrupting PeopleSoft's business whether the offer was accepted or not.

In voting to recommend rejection, the board stated that going forward with an Oracle and PeopleSoft merger would raise lengthy antitrust scrutiny, and federal regulators would probably forbid the transaction. In addition, Oracle would discontinue important PeopleSoft products and migrate the company's customers to its own wares.

"The unsolicited and hostile nature of the offer, combined with Oracle's statements, is designed to disrupt the company's strong momentum at significant cost to PeopleSoft's customers," PeopleSoft officials said in a statement.

In correspondence to PeopleSoft posted on Oracle's Web site, Oracle's chief executive officer, Larry Ellison, had characterized the offer as fair.

In a June 10 letter to PeopleSoft CEO Craig Conway, Ellison said he was concerned that Conway has "taken a negative position with respect to the merits and motivations behind our offer before you, and the PeopleSoft board, have taken the time required to consider the offer. We have made a serious, fully financed, all-cash offer to your stockholders, and your fiduciary duties to those stockholders require a full and fair review done in good faith."

PeopleSoft shareholders can choose whether to follow the board's recommendation. Oracle's offer, made June 9, is good for 20 business days. Meanwhile, PeopleSoft is continuing its talks with J.D. Edwards.

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