Fifteen months after it launched its hostile takeover bid for PeopleSoft, Oracle has won a major victory that brings it closer to acquiring its rival. The question is whether the war of attrition has been worth it.
When Knowledge@Wharton last looked at Oracle's bid for PeopleSoft, uncertainty prevailed and the outcome of PeopleSoft's acquisition of J.D. Edwards was unknown. That deal has been closed for more than a year, but the J.D. Edwards acquisition hasn't helped PeopleSoft elude Oracle's pursuit. When Oracle first bid for PeopleSoft, Wharton professors Morris Cohen and Harbir Singh said it wasn't clear if CEO Larry Ellison was serious or just wanted to upstage rivals. Time will tell, said the professors, adding that perhaps the PeopleSoft bid was just an ego trip. Ego trip or not, it's now clear that Ellison is serious and may just succeed.
On Sept. 9, Oracle won a lawsuit filed by the Department of Justice that sought to block its proposed acquisition of PeopleSoft. Oracle is offering $21 a share in cash for PeopleSoft in a bid that has been raised twice since Oracle's June 9, 2003, initial offer of $16 a share. Barring a DOJ appeal or the European Union preventing an acquisition - securities analysts expect the EU will follow the U.S. ruling - Oracle will have cleared its regulatory hurdles.
Wall Street analysts now put the odds of Oracle success in taking over PeopleSoft at 70%. The catch is that PeopleSoft's board of directors still dismisses Oracle's bid as a lowball offer. And PeopleSoft's poison pill provisions preventing a takeover are also still in place. Unless more shareholders tender shares to Oracle, CEO Larry Ellison will be held at bay despite his mantra that software consolidation is inevitable - a contention few experts will argue.
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