PeopleSoft board urges shareholders to reject Oracle

In an open letter to PeopleSoft shareholders released Tuesday, the company's board of directors reaffirmed their opposition to Oracle's proposed hostile takeover of the company, warning that Oracle's plan "poses extraordinary risks."

Oracle's plans for enhancement and support of PeopleSoft's products remain unclear, and the likelihood is high that federal regulators would deem the transaction anticompetitive and block its completion, PeopleSoft's board said.

The U.S. Department of Justice requested from Oracle on Monday additional information on its takeover plans, lengthening the government's review period. While the news was a setback for Oracle, the company said it remains optimistic the transaction will be approved and completed in a timely manner. It also cautioned in a statement against "confus(ing) process with outcome," an extended DOJ review is not unexpected for a deal of this size and complexity, Oracle said.

Oracle, in Redwood Shores, California, announced in early June an unsolicited offer to buy Pleasanton, California-based PeopleSoft, one of its key rivals in the market for enterprise applications. Days earlier, PeopleSoft announced plans to acquire J.D. Edwards & Co., creating a company that would nudge Oracle out of its number two position in the sector. PeopleSoft and Oracle both trail the dominant enterprise applications software vendor, SAP AG.

Executives from PeopleSoft and J.D. Edwards maintain that because Oracle's proposed takeover would shrink the market from three major vendors to two, it is likely to be rejected by government regulators. Oracle has counterargued that the enterprise software market remains a fragmented one.

Oracle's US$6.3 billion, all-cash tender offer to PeopleSoft's shareholders expires July 7, but the company has said it will consider extending the offer.

Responding to PeopleSoft customer concerns about its bid, Oracle said Monday it will contact every PeopleSoft customer to discuss its intentions. PeopleSoft's products will be supported and enhanced for years, and while free migration options will be offered to customers interested in moving to the Oracle E-Business suite, no customer will be forced to convert, Oracle said.

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