Updated from 2:33 p.m. EDT
Investors hoping to see
sweeten its offer for
may be disappointed, Oracle CEO Larry Ellison said Friday in a Delaware courtroom.
"There have been more
internal discussions about lowering the price than raising the price," Ellison said as he testified during the trial of his company's lawsuit aimed at removing PeopleSoft's anti-takeover defenses.
Oracle's latest bid for PeopleSoft stands at $7.7 billion, or $21 a share, but the stock has moved sharply upward in recent weeks, first fueled by the defeat of a government antitrust suit aimed at stopping the combination, and then by the firing of PeopleSoft CEO Craig Conway. Investors have been closely watching what appears to be the end game of a 16-month struggle for signs that the bid will go higher.
In recent trading, shares of PeopleSoft were off 40 cents, or 1.8%, to $22.13, while Oracle's stock had gained 2 cents to $12.31 a share.
It's worth noting, however, that Ellison has also been poor mouthing the company in public, calling it "damaged goods" in a not-very-subtle attempt to keep the price down.
The juicy testimony of high-profile figures like Ellison and Conway has obscured the actual point of the trial: determining whether the poison pill provisions can stand. Simply stated, the pill would serve to dilute the stock so much in the event that Oracle gains a substantial number of shares that the price would shoot to a prohibitively high level. Another anti-takeover provision offers PeopleSoft customers huge refunds if Oracle takes over the company and fails to adequately support existing customers.
William G. Lawlor, who heads the mergers and acquisitions practice of Dechert LLP, a Philadelphia-based law practice, said Oracle's lawyers face a difficult, but not impossible, task in attempting to breach the anti-takeover defenses.
"No Delaware court has removed a poison pill since the late 1980s," he said. "However, the recent focus on shareholder rights in the wake of
and other well-publicized scandals will push the court to take a hard look at the pill," he added.
The so-called buyer protection program, on the other hand, is a novel weapon, and "it may well be one that the court will strike down rather than let it become a precedent for other takeover targets," Lawlor said.
Under questioning by his own attorney on Friday, Ellison disputed Conway's recent testimony that Oracle made an offer to buy its smaller software rival to simply destroy a competitor. "We wanted to buy the company. We had been talking about buying PeopleSoft since the year 2000," Ellison said.
Ellison also said that PeopleSoft's weakness in 2003 was the trigger for Oracle's takeover attempt and initial lowball bid of $16 a share. "The timing looked ideal," he said. "The shareholders of PeopleSoft were faced with a complicated merger after a difficult quarter," Ellison said.
The tough quarter pushed PeopleSoft's stock below $15 a share in the spring of 2003, and the company was moving forward with the acquisition of J.D. Edwards, a money-losing maker of business software for manufacturing companies.
Ellison said that $16 a share was the lowest bid that had a chance to succeed. In fact, Oracle quickly raised the bid and eventually bumped it as high as $26 a share, only to lower it to $21 as the market lost confidence in Oracle's ability to win the tug of war, and PeopleSoft became cheaper.