Oracle, PeopleSoft prepared for midnight offer deadline

The Friday midnight expiration for Oracle's tender offer to PeopleSoft's shareholders for control of the company will either end the software rivals' bitter, 17-month battle or increase its ferocity.

Oracle said it will release the results of the offer as soon as feasible after 1 a.m. Eastern time, an hour after the deadline for what Oracle said will be its final offer. If a majority of PeopleSoft shares are not tendered to Oracle for the US$24 per share it has bid, Oracle plans to walk away from its takeover campaign. If it does receive the majority of PeopleSoft's shares, Oracle said it will treat that as a mandate from PeopleSoft's shareholders to continue pressing for a US$9.2 billion buyout of PeopleSoft, against the wishes of PeopleSoft's directors.

Financial analysts are split in their opinions about Oracle's chance of success. PeopleSoft had a head start in keeping itself out of Oracle's hands: Around 20 percent of its shares are owned by insiders or large institutional investors that do not plan to tender their shares. However, Oracle's bid is generally regarded as having lifted PeopleSoft's shares higher than they would otherwise trade. Investors interested in seeing the bid continue are likely to accept the tender.

PeopleSoft shares ended Thursday trading on the Nasdaq exchange at US$22.92. In early Friday trading, they rose slightly to US$23.01.

If Oracle's 50 percent support benchmark is met, it still faces a daunting obstacle to completing its takeover: The opposition of PeopleSoft's board, which can take advantage of provisions in PeopleSoft's bylaws and in Delaware (the company's state of incorporation) law to block a hostile acquisition. The two companies concluded last month a trial in Delaware's Chancery Court, which Oracle has asked to invalidate PeopleSoft's antitakeover protections. Oracle and PeopleSoft will meet on Wednesday for a hearing on that case with the presiding judge, who is still preparing his decision.

PeopleSoft is already trying to limit the damage that would be done if it can't muster the support of a shareholder majority. Company presidents Kevin Parker and Phil Wilmington sent a letter to PeopleSoft employees on Wednesday advising them not to be surprised if Oracle receives more than 50 percent of PeopleSoft's shares in its tender offer.

"We know that stockholders may tender for a variety of reasons," they wrote. "The intense media coverage of Oracle's offer will continue for the next several weeks, but we can't be distracted."

If Oracle cannot persuade the Delaware court to strip PeopleSoft's antitakeover protections, its next option would be a proxy contest at PeopleSoft's 2005 annual meeting to replace PeopleSoft's incumbent directors with board members of its own choosing. PeopleSoft has staggered terms for its board members, but the company's firing of former Chief Executive Officer Craig Conway and subsequent reduction in its board size from eight members to seven leaves it with four directors, a majority, up for re-election in 2005.

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