Oracle: PeopleSoft deal ‘only a matter of time’

22 Oct 2003

PARIS: As it awaits regulatory approval from the EU and the US Department of Justice, Oracle said it is confident that if it receives approval the likelihood of its US$7 billion acquisition of ERP rival PeopleSoft will “only be a matter of time”.

Speaking at the annual Oracle World event in Paris, Chuck Phillips, Oracle’s executive vice president in charge of corporate strategy and business development, said that despite delaying tactics by PeopleSoft – ranging from optimistic sales and revenue forecasts and daily communications with shareholders and customers – the only significant hurdle facing Oracle is regulatory approval in the US and EU.

A frenzied bidding battle for PeopleSoft began last May when the company agreed to acquire ERP rival JD Edwards. Oracle stepped in with a bid to acquire PeopleSoft for US$5.1bn, which edged up to US$7bn as the bidding continued. However, in July PeopleSoft said it completed its acquisition of JD Edwards for US$6bn having acquired 88pc of shareholders’ stock.

Oracle, however, has refused to back down on its hostile takeover and the company has been locked in a legal battle with PeopleSoft over its policy against Oracle’s bid, known in the business as a poison pill.

According to Oracle, PeopleSoft’s tactics have ranged from stating a highly profitable operating margin next year of 17pc to ringing and communicating with its customers on a daily basis offering them discounts and product upgrades. Already JD Edwards and PeopleSoft workers have begun working together on a product roadmap.

Oracle’s bid is currently in limbo until the US Justice Department and the EU rule on their respective antitrust investigations into the bid.

Speaking at a press conference in Paris, Phillips said that he expects the EU and US Justice Department to come to their conclusions at roughly the same time, “either late in November or early in December”.

Phillips said: “We are optimistic. We have a good case and believe that our acquisition of PeopleSoft will improve conditions in the business. The hardest thing we face in the entire thing is regulatory approval. The transaction is not dead.”

Following regulatory approval, Oracle is expected to continue its battle to woo PeopleSoft shareholders, an aspect that Phillips doesn’t anticipate will cause much difficulty. “They want more money, we will give it to them. We have a market capitalisation of $67bn. PeopleSoft are worth $7bn. It would not be a strain on us at all,” Phillips said.

Discussing the poison pill defence tactics utilised by PeopleSoft, Phillips said: “Poison pills rarely ever stop a deal from happening. In the many years we’ve spent on Wall Street, we’ve never seen it stopping a transaction from happening. PeopleSoft has rolled the dice and announced a high forecast for next year. By that time the transaction will have happened. PeopleSoft’s shareholders will have realised how [inaccurate] those forecasts have been.”

Phillips reiterated: “We are sceptical about the [PeopleSoft] forecasts for next year and so are our investors and that will become evident in time. The only real obstacle we see is regulatory approval.”

Oracle employs approximately 1,000 people in Ireland and its operation handles sales of Oracle products in the EMEA region worth in excess of US$2bn in revenue. In 2002 alone, the company spent €130m in the Irish economy. Last month the company revealed that it may soon be cutting 100 jobs in Dublin as part of a cost-cutting exercise.

By John Kennedy