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PeopleSoft Turns Down Oracle, Continues With Bid For J.D. Edwards

The company's board of directors urged shareholders to reject Oracle's improved bid and is moving ahead with its efforts to buy J.D. Edwards
PeopleSoft has officially told Oracle "No thanks."

The company's board of directors on Friday urged stockholders to reject Oracle's unsolicited $6.3 billion takeover offer, citing the possibility of regulatory objections to the deal between the business software makers.

PeopleSoft said its board voted unanimously to recommend rejection of the hostile takeover bid, which Oracle sweetened this week from $5.1 billion. The board concluded that efforts to combine the companies would face delays from regulatory agencies--and that there's a significant chance the transaction would be prohibited. Those delays and uncertainties, combined with Oracle's stated intention to discontinue PeopleSoft's products, would subject PeopleSoft's business to irreparable damage, the company said.

The board also said Oracle's latest offer of $19.50 a share, a 22% increase over its original offer of $16, is still inadequate.

Oracle's new offer undervalues the company and isn't in the best interest of PeopleSoft stockholders, president and CEO Craig Conway said Friday, and could do serious damage to PeopleSoft's business.

On Thursday, PeopleSoft said it's moving ahead with its $1.75 billion offer for J.D. Edwards & Co., giving stockholders the option of choosing cash or PeopleSoft stock.

Under terms of the exchange offer, PeopleSoft is offering PeopleSoft common stock with a value equal to $7.05 in cash, plus the value of 0.43 of a PeopleSoft common share for each share of J.D. Edwards common stock. The exchange offer, open until July 17, is valued at $1.75 billion, or $14.33 per share.

Oracle execs also spent time Thursday talking with the media and corresponding with PeopleSoft customers to offer assurances that the company won't completely abandon PeopleSoft products or businesses that use the software. "I've talked to a handful of Oracle and PeopleSoft customers in the last week," says Mike Roche, executive VP of Oracle's global-support organization. "What we want to tell the customers is that this is about them. We are going to extend support of the PeopleSoft products, offer them a better choice, and bring the full weight of Oracle behind them, so they can be successful and get full ROI on their software."

The state of Connecticut isn't necessarily buying that. On Wednesday, it filed an antitrust suit against Oracle, alleging that its planned takeover of PeopleSoft will violate state and federal laws, damage the state and its economy, and raise prices by reducing competition. On Thursday, chairman and CEO Larry Ellison responded to concerns that an Oracle takeover could cost the state millions of dollars. In his letter, Ellison said, "We understand that maintaining your satisfaction as a customer is the key to the success of this transaction."

Connecticut Attorney General Richard Blumenthal responded in a written statement: "As in any lawsuit, my door is open to the other side for discussions anytime here or anywhere else. Certainly, nothing we have learned so far has diminished our determination to pursue this antitrust enforcement action filed yesterday in federal court seeking to protect competition and consumers from an unlawful takeover attempt."

All the turmoil is opening the door for SAP, which leads the enterprise resource planning market, followed by Oracle, and then PeopleSoft.

PeopleSoft customer Joseph Vossen, VP of information services at Smead Manufacturing Co., a maker of office products, says a SAP salesman called him and left a message on his voice mail Thursday. Says Vossen, "They're calling all the PeopleSoft customers and offering a really good deal to bail out of PeopleSoft and go to SAP, so you don't have to go to Oracle."