Oracle's hostile bid for PeopleSoft is unlikely to be resolved for "several months" despite the database giant's latest offer already attracting 61 per cent of the company's shares, Gartner has predicted.
The analyst firm noted that, as long as the so-called poison pill provision remains in effect, the shares tendered to Oracle cannot be converted to a majority interest in PeopleSoft.
On 19 November 2004, Oracle announced that more than 60 per cent of the outstanding shares of PeopleSoft have been tendered to Oracle at $24 per share. Oracle formally asked PeopleSoft's board of directors to come to an agreement and remove the shareholder rights provision (known as the "poison pill" provision).
However, Gartner points out that on 20 November 2004, PeopleSoft rejected Oracle's offer, stating that "the majority of stockholders" agree the $24 per share bid is insufficient and citing a variety of reasons for not approving the deal, including outstanding lawsuits against Oracle.
Further hearings are expected in the lawsuit brought by Oracle in the Delaware Chancery Court. If the court rescinds the poison pill provision, Oracle can proceed relatively quickly by converting its shares and forcing a vote in favour of the agreement, according to an advisory written by Gartner analysts Lee Geishecker, Jeff Comport, Yvonne Genovese, Alexander Drobik and Kim Collins.
"If the court does not agree to rescind the provision, PeopleSoft could use it to block any attempted takeover. The court must also assess whether PeopleSoft may continue offering its customer assurance program, which could represent a substantial long-term financial liability for Oracle if the company's takeover effort succeeds," the Gartner paper stated.
Despite the fact that Oracle has publicly said the offer represents its highest bid, PeopleSoft's board of directors will, Gartner expects, continue to make its case for higher valuation while remaining mindful of shareholders' wishes.
PeopleSoft's next quarterly shareholder meeting should take place in March 2005. If the matter is still pending by that date, the shareholders could continue to back the board's strategy or vote to replace the board with members more receptive to Oracle's offer.
Gartner advised existing or potential PeopleSoft customers that: "The company's push to exceed its recent profitable financial quarter presents a potential short-term buying and upgrade opportunity.
"But weigh these opportunities against the heightened uncertainty regarding PeopleSoft's product strategies and your own assessment of the likely outcome of the takeover bid."
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