PeopleSoft`s board of directors has voted unanimously to recommend that PeopleSoft stockholders reject Oracle`s revised unsolicited offer to purchase all PeopleSoft shares for $26 each. In addition, lawyers within the US Department of Justice antitrust division have recommended that the department file suit to block Oracle`s proposed acquisition of PeopleSoft.
The staff recommendation has been submitted to the office of the Assistant Attorney General. PeopleSoft was also informed that the department would make its decision no later than March 2, 2004.
The board recommends that PeopleSoft stockholders not tender their shares to Oracle. It made its recommendation after a thorough review with its financial and legal advisors and acted upon the recommendation of its transaction committee of independent directors.
In making its recommendation, the board concluded:
* The revised offer price is inadequate and does not reflect PeopleSoft`s real value, based on the opinions of Citigroup Global Markets and Goldman, Sachs & Co, its financial advisors.
* The proposed combination of PeopleSoft and Oracle continues to face substantial regulatory scrutiny in both the United States and Europe and there is a significant likelihood that the transaction will be prohibited under antitrust law.
PeopleSoft president and chief executive officer, Craig Conway, says, "The board believes PeopleSoft has a better plan for stockholders. Oracle`s offer does not begin to reflect the company`s real value, including the value we are creating through our successful combination with JD Edwards.
"We believe Oracle is using the entire process - tender offer, antitrust and proxy solicitation - in an attempt to damage our company. Don`t underestimate the significant additional value PeopleSoft can create once the disruption from Oracle`s hostile activities has ended."
The board says PeopleSoft has met or exceeded its earnings guidance in 16 of the past 17 quarters. In addition, it has met or exceeded management`s guidance each quarter since Oracle announced its hostile offer, despite what the board views as Oracle`s attempts to disrupt the company`s business.
The offer, says the board, undervalues PeopleSoft based on fundamental valuation measures:
* The company is currently trading at the low end of its historical valuation range relative to its forward earnings, largely due to the uncertainty created by Oracle`s hostile actions.
* For the same reasons, the board believes PeopleSoft is currently trading at a lower multiple relative to its peers. Applying a normalised valuation multiple to PeopleSoft`s guidance of $0,92 to $0,95 per share for 2004 EPS implies a trading value for the company that far exceeds the offer price even before taking into account a control premium.
* A majority of Wall Street equity analysts who published price targets for PeopleSoft prior to February 4, 2004, the day of Oracle`s revised offer, had a target above $26 per share. These published targets evaluate PeopleSoft on a standalone basis.
* The price offered values the company at multiples far below those paid in other recent large transactions in the enterprise software industry.
Oracle`s offer also continues to face likely antitrust roadblocks. Today, eight months since Oracle first announced its hostile offer, antitrust investigations are ongoing, including by the United States Justice Department, the European Commission and numerous state attorneys general. The board continues to believe the proposed combination of PeopleSoft and Oracle faces substantial antitrust scrutiny and the significant likelihood that the combination will be prohibited under antitrust law.
In addition, PeopleSoft`s board believes Oracle is attempting to damage PeopleSoft, its business and its shareholder value in an apparent effort to acquire the company at an unreasonably low price.
The board says stockholders should consider:
* In the announcement of its revised offer and various public comments, Oracle falsely stated PeopleSoft had lowered its guidance for its first quarter 2004. In fact, PeopleSoft has only given first quarter guidance once, on January 29, 2004, and has never lowered that guidance. At the same time, PeopleSoft increased guidance for 2004 full year.
* The regulatory delays, combined with uncertainty of the outcome of the regulatory process, and Oracle`s stated intentions to discontinue the company`s products, would subject its business to irreparable damage.
* The board believes Oracle has attempted to manipulate the antitrust process in order to cause delays and uncertainties to damage PeopleSoft`s relationships with customers. Oracle did not make its initial filing in Europe for more than four months following its offer. Then it failed to fully respond to inquiries from the European Commission, further delaying the process.
PeopleSoft will hold its annual meeting of stockholders on March 25, 2004. Stockholders of record at the close of business on February 10, 2004 will be eligible to vote at the meeting.
It will also be soliciting proxies for use at that meeting, to vote in favour of the slate of directors nominated by the board.
Share
Editorial contacts