Oracle vs. Peoplesoft: a Hostile Tender Offer Analysis

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Introduction It all kicked off on 6 June 2003, when Oracle ambushed PeopleSoft with a hostile takeover bid valued at $5.1 billion just four days after PeopleSoft agreed to a $1.8 billion deal with J.D. Edwards. The acquisition fight lasted over 18 months and has become a staple in business and law school case studies. PeopleSoft specialized in Enterprise Resource Planning (ERP) software solutions. It was very strong in human resource software and other back-office functions, competing with SAP and Siebel; however, as the ERP space began to see dramatically reduced growth, PeopleSoft’s sales began to lag. Company leaders saw the acquisition of smaller J.D Edwards as a way to bolster and expand its business into enterprise…show more content…
Assuming the board and management team were focused solely on building shareholder wealth, the priorities turned on determining whether the offer was genuine, and if so, obtaining a best offer from Oracle that clearly exceeded the forecast growth of the company as a standalone entity. In this case, even with the mere six percent industry growth rate forecast, PeopleSoft’s share price could be expected to top $16 within a year. Clearly, Oracle’s offer was not one to be taken seriously. However, it was a point at which negotiations could begin. Given that the case review indicated that the board believed that Oracle’s bid was a valid threat, but not one that fully valued the company, management turned to traditional antitakeover defenses to make Oracle’s goal unpalatable. Tactics included adoption of a poison pill defense and consideration of a Customer Assurance Program (CAP). The board’s strongly negative rejection of Oracle’s initial offer, continued negotiations to close the J.D. Edwards deal, and adoption of takeover defenses were designed to maintain a consistent and profitable operation and boost stock price to so that Oracle had to raise its offer price a lot if it wanted to acquire PeopleSoft, while incidentally maximizing shareholders’ benefits. Independent directors’ Reactions and Strategies Reaction to the hostile bid The board established

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