PeopleSoft Board Rebuffs Oracle Yet Again

Don’t breath a sigh of relief yet. Although PeopleSoft’s board announced today it unanimously rejected Oracle’s “best and final” offer of $24 a share, it ain’t over till it’s over, and it ain’t over.

The takeover bid is now in the hands of PeopleSoft’s shareholders, who must decide by Nov. 19 whether to offer their shares to Oracle. PeopleSoft’s board has recommended against it, saying that the company is worth “substantially more” than the approximately $8.8 billion Oracle would end up paying.

Big If

Senior research analyst Tad Jaffray, of Piper Jaffray, agreed. “We believe that if PeopleSoft can deliver on the new guidance, Oracle’s current $24 offer does undervalue the company,” he said in a statement given to CRM Buyer.

That ‘if,’ however, may be a big one. PeopleSoft has said it can substantially increase its operating margins. Although Jaffray estimates the company won’t be able to widen the margins as much as it projects, he still targets the stock price at $27.

Oracle had offered as much as $26 in one of four previous bids during the 18-month-long takeover saga. Jaffray says that it is difficult to predict the outcome, but he believes it is likely that more than 50 percent of shares will be tendered.

Another Chapter?

But lest you think that the story will be come to a conclusion by midnight Nov. 19, think again. PeopleSoft’s board holds one more deal-killer, a “poison pill” scheme that would flood the market with new PeopleSoft shares that Oracle would have to buy, making the takeover prohibitively expensive.

A hearing is set for Nov. 24 in Delaware Chancery Court on Oracle’s lawsuit to force PeopleSoft to throw out the poison pill.

Oracle chief Larry Ellison has said that if the shareholders reject his company’s offer he will walk away. “Oracle has been at this for a year and a half, and it is now time to bring this matter to a close,” Ellison said. “We will respect the will of the shareholders.”

But Oracle can always make another bid if PeopleSoft’s stock falls after the smoke has cleared.

PeopleSoft may not be finished with Ellison, either. In its press release on the rejection, it reiterated its claims of unfair business practices against Oracle. An Oakland, Calif., jury will begin hearing PeopleSoft’s case Jan. 10. PeopleSoft is seeking more than $1 billion in damages.

PeopleSoft’s stock had fallen 53 cents, or 2.46 percent, to $22.23, in morning trading Thursday. Oracle was down 49 cents, or 3.66 percent, to $12.89.