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7/25/2003
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Oracle Ups PeopleSoft Bid To $7.5 Billion

The vendor reaffirmed its intention to buy PeopleSoft, saying it's prepared to cover the extra cost of its rival's recent acquisition of J.D. Edwards.

With PeopleSoft Inc.'s acquisition of J.D. Edwards & Co. a done deal, Oracle is turning up the pressure on its hostile takeover of PeopleSoft. Oracle says it will add $1.2 billion to its $6.3 billion bid; it has filed its amended offer to the Securities and Exchange Commission.

The new price tag is a result of some changes to its unsolicited $19.50-per-share offer that stem from PeopleSoft's issuance of an additional 53 million shares as part of its $1.8 billion acquisition of J.D. Edwards. Oracle's offer will expire Aug. 15, but the company says it will likely extend that deadline. Despite Oracle's redoubled efforts to buy PeopleSoft, any such deal still has to clear an antitrust review by the U.S. Department of Justice--and strong opposition from PeopleSoft's board of directors, which has twice rejected Oracle.

Robert Becker, an analyst with Argus Research Corp. in New York, said Friday that the acquisition of J.D. Edwards by Oracle adds to the likelihood that Oracle will be unable to complete its takeover effort.

"I think the combination of PeopleSoft and J.D. Edwards together is less attractive to Oracle than PeopleSoft by itself would have been," Becker said. "I don't see them getting into a bidding war for the new PeopleSoft, and I wouldn't count on Oracle raising its bid above the current $19.50."

PeopleSoft's stock has dropped from $17.90 per share since it took control of J.D. Edwards last week to less than $17, reflecting investors' skepticism about Oracle's ability to pull off the deal.

Becker said Oracle may wait to see if it can make another takeover bid in the future when it can get a lower price.

"It really depends on how well PeopleSoft can execute," he said. "If they keep their share price relatively high, it's going to be harder for Oracle to ever complete this acquisition."

PeopleSoft has already rejected Oracle's bid twice. CEO Craig Conway, a former Oracle executive, reiterated his contempt for the offer during a meeting earlier this week with J.D. Edwards employees.

If Oracle persists, PeopleSoft can resort to a "poison pill--an antitakeover measure-- to ward off a hostile bid. Oracle is suing in Delaware to invalidate PeopleSoft's poison pill.

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