Oracle raised its bid for PeopleSoft to US$26 per share on Wednesday, boosting the all-cash offer's total to $9.4 billion.
Oracle began trying to acquire rival enterprise software maker PeopleSoft last June, initially offering PeopleSoft shareholders $16 per share, totaling $5.1 billion, for control of the company. Analysts and shareholders said the company was offering too little, and Oracle raised its bid to $19.50 per share. After PeopleSoft closed its August acquisition of J.D. Edwards, increasing the number of shares in the company, the price tag for the acquisition climbed to $8.3 billion.
Wednesday's new bid marks the first time Oracle has offered shareholders a significant premium on PeopleSoft's trading price. Shares of PeopleSoft ended trading on Tuesday on the Nasdaq exchange at $21.89, 19 percent lower than the $26 Oracle says it will pay.
Oracle also extended for the sixth time the deadline on its bid. Previously set to expire on 13 February, the offer to shareholders is now valid until 12 March.
This offer represents Oracle's final price, Oracle chairman and CFO Jeff Henley said in a written statement.
PeopleSoft responded to the offer by advising its shareholders to take no action until its board has met and considered the new offer. A PeopleSoft spokesman declined to say when that meeting will take place. The board unanimously rejected Oracle's previous offers, citing the merger's anticipated ill-effects on PeopleSoft customers and potential rejection on antitrust grounds by government regulators.
The US Department of Justice and the EU can step in to block the deal if their investigations show that a merger would negatively affect industry competitiveness. The EU said recently it will complete its inquiry by 21 April. The DOJ has not announced a timeline, but Oracle said on Wednesday that it expects a DOJ decision before the March 12 conclusion of its offer. PeopleSoft and Oracle currently hold the number two and three positions in the enterprise applications market, behind SAP AG.
Even if PeopleSoft's shareholders decide to sell and regulators give the green light, PeopleSoft management can block the deal by deploying the company's "poison pill," a mechanism in its bylaws that lets it inflate the number of shares outstanding and drastically increase the cost of an acquisition. Oracle is suing in Delaware's Chancery Court to nullify PeopleSoft's poison pill. Action in the case has slowed as the companies await decisions from the DOJ and EU.
Oracle and PeopleSoft will have a showdown over the takeover tussle in late March, when PeopleSoft holds its annual shareholders' meeting. Oracle has nominated a slate of five directors to replace a majority of PeopleSoft's board. PeopleSoft chief executive officer Craig Conway said last week he hopes his company's shareholders will take advantage of the meeting to defeat Oracle's board slate and "put Oracle's apparent efforts to interfere with our business behind us."
Merrill Lynch said in a research note on Wednesday that the new offer demonstrates Oracle's zeal for pushing the takeover through, despite PeopleSoft's strong opposition.
"We believe it would have been better for Oracle to wait for PeopleSoft's March quarter results to be reported. However, with the recent move of PeopleSoft's stockholder meeting to March 25, Oracle was left with few other options than to put their cards on the table," the firm said. "Clearly this indicates Oracle's strong commitment to acquiring PeopleSoft."