A major battle is over, but the war for



rages on.

Executives of the business software giant continued to resist


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$9 billion hostile takeover offer, even after a majority of their shareholders tendered into the bid ahead of a Friday night deadline.

Oracle, which is challenging PeopleSoft's anti-takeover "poison pill" in a Delaware court this week, described the situation as an "impasse" in a letter Sunday and urged PeopleSoft management to follow through on shareholders' wishes. At $24 a share, Oracle said it is already offering too much for the company in light of financial forecasts that are "not credible."

PeopleSoft said Saturday that its board has considered the voting results of Oracle's tender offer and unanimously reaffirmed its previous conclusion that the company is worth "substantially more."

"Based on the numerous conversations we have had with our largest stockholders over the past 10 days, the board believes that a majority of our stockholders agree that Oracle's $24 offer is inadequate and does not reflect PeopleSoft's real value," said A. George Battle, chairman of PeopleSoft's transaction committee of independent directors, in a prepared statement.

"This majority is comprised of stockholders who did not tender their shares, as well as stockholders who tendered but told us that they believe PeopleSoft is worth more than $24 per share. We are confident that in the time leading to our 2005 Annual Meeting we will continue to demonstrate PeopleSoft's superior value to our stockholders."

Early Saturday morning, Oracle announced that 228.7 million shares, or more than 60% of PeopleSoft shares, had been validly tendered by the midnight deadline imposed by Oracle in what it had called its "best and final offer."

In a letter to PeopleSoft released after the vote deadline, Oracle said the offer was "fully valued, and it is clearly fair. There is no business execution risk for your shareholders. It represents a substantial premium to PeopleSoft's true historical trading multiples. There are no alternative bidders or counter offers. Most important, it has now been endorsed by a majority of your shareholders."

The offer represents a premium of 3.7% over PeopleSoft's Friday closing price of $23.17. In trading Monday morning, PeopleSoft fell 2 cents to $23.15, while Oracle lost 9 cents to $12.66.

"We believe it is time to bring this matter to a close, for the good of PeopleSoft's shareholders, customers, and employees," Oracle said in its letter Saturday. "We are prepared to complete and pay for the acquisition of all outstanding shares of PeopleSoft upon satisfaction of the remaining conditions, which are all in your control. We are available to meet at your convenience."

Even so, control of the Pleasanton, Calif.-based business software maker has yet to be decided. Because PeopleSoft's "poison pill" prevents Oracle from actually buying the tendered shares, the M&A imbroglio now moves into the end game, a proxy struggle for control of the target company's seven-member board of directors.

The pill, which automatically dilutes the company's shares, making a takeover prohibitively expensive, is being challenged by Oracle in a lawsuit filed in the Chancery Court of Delaware. It's unclear when the judge will deliver a verdict. Most legal experts believe the judge will go with precedent and let the antitakeover defense stand. No Delaware court has removed a poison-pill provision since the late 1980s.

"Given that a majority of PeopleSoft's owners are now prepared to sell at $24.00 per share, we are requesting the Board immediately redeem the poison pill and exempt the transaction under Delaware Section 203," Oracle's letter stated. "We also request a meeting to finalize a definitive merger agreement at $24.00 per share with the goal of announcing a deal prior to market open on Monday, November 22, 2004."

However, Oracle officially extended its tender offer until Dec. 31.

PeopleSoft reiterated on Saturday that it would be willing to discuss an offer from Oracle, but at a price that "must reflect both PeopleSoft's intrinsic value and the fact that PeopleSoft is materially more valuable to Oracle now than it was when Oracle made its inadequate $26 per share offer."

In any case, Oracle is expected to nominate its own slate of directors by Nov. 25; the votes will be counted at PeopleSoft's annual shareholder meeting, which must be held before the end of April.

The takeover fight has been costly. The most recent tallies by both companies show that PeopleSoft has spent $81 million to fend off Larry Ellison's unwanted advances while Oracle has shelled out $82.7 million on the chase.

The fight also cost former PeopleSoft CEO Craig Conway

his job, although the blow was softened by a

rich severance deal.

Despite the expense, Oracle expects the acquisition to be accretive fairly soon, and many Wall Street analysts have favored the transaction.

Tad Piper of Piper Jaffray, for example, said earlier this year: "The acquisition of PeopleSoft could potentially drop close to $780 million in calendar 2005 pro forma net income to Oracle's bottom line. With 5.22 billion shares outstanding, this would be equivalent to 14 cents in calendar 2005 EPS for Oracle, or potentially 75 cents a share vs. current estimates of 61 cents a share." (His company does not have an investment banking relationship with either Oracle or PeopleSoft.)

In addition, Oracle again made its case early Saturday morning for the merger's upside: "We believe the combination of Oracle and PeopleSoft is compelling. The joint company will have a larger combined customer base, expanded brand reach, critical mass in more industries, and be able to provide substantially better global support. Most important, the combined company will be more competitive against


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, and a wave of new outsourcing competitors."

Others believe Oracle will have a tough time digesting its rival, and suggest that it may have paid too much.

"Oracle's acquisition of PeopleSoft is not addressing today's needs," said FTN Midwest Research analyst Trip Chowdhry, who had been quite positive about the deal earlier on. "It's too late. They are fighting the-day-before-yesterday's battle by buying this company."

In addition, one key reason Oracle has eyed PeopleSoft -- the company's steady maintenance revenue -- is under pressure throughout the industry as customers try to negotiate lower rates, Chowdhry said. (Midwest Research does not have an investment banking relationship with either company.)

Oracle launched the battle in June 2003, with an initial bid of $16 a share. The offering price fluctuated a number of times and peaked at $26 a share in February 2004.

What turned out to be the decisive blow wasn't struck by either side. It came when U.S. District Court Judge Vaughn Walker

ruled against the Department of Justice, which had sued to stop the deal. The government claimed that the acquisition of PeopleSoft by Oracle would damage competition in the market for sophisticated business software.