Behind the scenes of Oracle-Siebel

...executive, Mike Lawrie, appointing board member George Shaheen to replace him, executive recruiters rightly speculated that such a move is usually done as a short-term measure when a company is on the block.

Around the time of Shaheen's appointment, Siebel entered buyout talks with two private-investment partnerships. Ultimately, however, those talks collapsed when the potential buyers determined that Siebel wanted more than they were willing to pay.

Oracle enters, stage left
Following Siebel's annual shareholders meeting in June, Oracle's co-presidents, Phillips and Safra Catz, contacted Siebel. They discussed the possibility of a merger price of about $11 a share in cash or a combination of Oracle stock and cash.

"Mr. Siebel stated that in light of the fact that Siebel Systems' market price was then approximately $9 per share, he felt that the Siebel Systems board of directors would be more receptive to a higher per-share price," the SEC filling states. "Mr Phillips and Ms Catz contacted Mr Siebel later that day, indicating that Oracle might be willing to pay a price in the range of $11 to $12.60 per share, subject to further business and financial analysis, and due diligence."

Two days later, Siebel discussed Oracle's proposal with James Gaither, a Siebel board member and a Perseus member, as well as Goldman Sachs, its investment bank, and Cooley Godward, its outside legal adviser. On 15 June, Oracle and Siebel signed a nondisclosure agreement.

For the next two weeks, Oracle conducted an extensive review of Siebel's financials and operations, and toward the end of June, it noted that it was not willing to consider the high end of its buyout range. Oracle also noted that it wasn't prepared to enter into negotiations and wanted more time to conduct its due diligence.

"On 5 July... Mr. Siebel updated the committee members on the status and timing of the potential transaction with Oracle. After discussion, the executive committee determined that in the absence of active negotiations, Siebel should terminate discussions with Oracle," according to the SEC filling. The next day, Siebel's attorneys asked Oracle to return the confidential documents it had received under the nondisclosure agreement.

Waiting it out
The following day, Siebel issued a preliminary warning that its revenues for the June quarter would fall below analysts' estimates. That sent Siebel's stock down to $8.59 a share.