8 October 2004 A director of software giant Oracle has testified that the company’s $7.7 billion cash offer to acquire business applications vendor PeopleSoft may not be its final bid.
Oracle director Joseph Grundfest made the statement in a trial in Delaware this week. Oracle wants the court to remove two outstanding hurdles to its acquisition its rival: a ‘poison pill’ stock provision and a customer rebate guarantee.
“We’ve never said that $21 [$7.7 billion in total] per share was the final offer,” stated Grundfest. But when challenged about whether PeopleSoft shareholders should expect the value of the bid to move up or down, Grundfest commented: “We haven’t said anything publicly about that.”
Oracle’s victory in the antitrust case launched by the US Department of Justice, followed by the firing of PeopleSoft CEO Craig Conway, had led some commentators to suggest that the only issue preventing the deal closing, was price.
But there is little agreement about what the price should be. PeopleSoft’s board has consistently argued that Oracle’s bid undervalues the company. PeopleSoft recently reported better than expected financial results. The board has also indicated it would accept the bid if it felt the price was right.
In recent weeks, PeopleSoft’s shares have been trading above the $21 level of Oracle’s offer. But some financial analysts have said the figure has been artificially bolstered by the Oracle offer.
Meanwhile, Oracle’s Grundfest, said the PeopleSoft Customer Assurance programme threatened Oracle’s ability to close the merger because of “the mushrooming potential size of the risk that we have to address”.
Under the programme, PeopleSoft customers qualify for up to five times the price of their software in the event of a takeover where the buyer discontinues product support. This could potentially amount to a liability of more than $2 billion for Oracle.
Oracle has also extended its current bid offer of $7.7 billion to PeopleSoft’s board of directors until 22 October. The offer was due to expire today (18 October, 2004).