By Alorie Gilbert, 24 February 2004 09:05
NEWS In a letter to shareholders, PeopleSoft CEO Craig Conway defended his company's rejection of a hostile $9.4bn buyout bid from Oracle and asked shareholders to reject Oracle's attempt to gain control of its board.
The letter, which PeopleSoft began mailing on Friday, was accompanied by a proxy card for casting votes in PeopleSoft's board election before the company's 25 March annual shareholder meeting.
"We firmly believe that Oracle's attempt to gain control of PeopleSoft's board is exclusively to advance its own agenda and does not further your interests as a PeopleSoft stockholder," the letter reads.
PeopleSoft's board has rejected three unsolicited offers from Oracle over the past eight months. The third one, an all-cash $26-a-share offer, offers a modest premium on PeopleSoft shares, which closed on Friday at $22.20. Oracle has said that bid is its final offer.
Defending the rejection of the offer, Conway states in the letter that PeopleSoft has delivered strong financial results, "despite nearly three quarters of what we believe is Oracle's attempt to disrupt our business and damage your investment in PeopleSoft". In the letter, he promises "significant licence revenue growth in the coming year" and an increase in earnings per share of more than 40 per cent this year. In addition, Citigroup Global Markets and Goldman Sachs agreed that the $26 bid undervalues the company, the letter states.
"Don't underestimate the significant additional value PeopleSoft can create, once the disruption from Oracle's hostile activities has ended," Conway states.
Conway also defends the anti-takeover measures his management team has adopted to protect itself from an Oracle. One is a money-back guarantee program that has created more than $1.5bn in liabilities for any company that were to acquire the software firm. A group of PeopleSoft shareholders have sued to stop the programme.
"This programme was developed to help protect and create shareholder value by giving customers signing new contracts confidence that their investments in PeopleSoft products will be protected," the letter says.
Oracle mailed its own letter to PeopleSoft shareholders last week, accusing PeopleSoft's managers of disregarding shareholder interests in order to "enrich themselves at your expense".
Oracle, which launched its tender offer last June, has proposed that PeopleSoft's eight-seat board be expanded to nine seats and has nominated five candidates to fill the new seat and the four that are up re-election. Conway is one of the directors whose term is expiring.
The outcome of the proxy battle for PeopleSoft's board will be influenced in large part by on how the US Department of Justice views Oracle's bid. The agency has recommended blocking the deal on the grounds that it's anticompetitive. PeopleSoft expects a final decision by Assistant Attorney General Hewitt Pate by 2 March.
Alorie Gilbert writes for CNET News.com
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