An unusual form of high-stakes corporate courtship is taking place in a courtroom in Delaware, where top executives from Oracle and PeopleSoft have spent the last two weeks publicly manoeuvring for a negotiating edge while ostensibly testifying in a trial.
Everyone from Oracle CEO Larry Ellison to senior members of PeopleSoft's board has taken the witness stand and savaged his or her counterpart's character and business strategies, a tactic seemingly calculated to nudge up or down one crucial number: Oracle's current offer to pay PeopleSoft stockholders $21 a share in its takeover bid.
As the trial winds down, it's become clear that PeopleSoft's board is now willing to sell -- though only if the price is right. Former CEO and board member Craig Conway may have been reticent, but his forced departure, just before the trial, began opening the door to a possible agreement.
"Possible", though, is a far cry from "certain": Oracle wants to pay less. PeopleSoft is demanding more. The trial in Delaware's Court of Chancery, where Oracle is attempting to eliminate PeopleSoft's "poison pill" defences, became the two companies' public negotiating forum.
Consider the evidence: In a this-is-the-best-you-might-get ploy, Ellison indicated last week that Oracle was having "discussions" about reducing its offer to less than $21 a share. Then, on Monday, Oracle co-president Safra Catz took the stand to say that PeopleSoft's financial condition had dropped by 25 percent to 33 percent, which conceivably would reduce Oracle's offer from $7.7bn to just more than $5bn.
Employing what was supposed to be no-holds-barred litigation to jockey for a higher or lower price tag eventually drew a mild rebuke from Judge Leo Strine, the vice chancellor of the Delaware court who is overseeing the trial. On Tuesday, Strine quipped that the trial had become part litigation, part business deal.
Oracle's offer has already zoomed up and down a few times from the company's initial $16-a-share bid. The database software company said in February that it expected its rival to earn 85 cents a share in 2004 and upped its tender offer from $19.50 to $26 a share. Then, in May, Oracle revised its bid to $21, citing a decline in PeopleSoft's value.
One remaining obstacle to a friendly acquisition is that PeopleSoft shareholders are holding out for a hefty takeover premium, which is customary in the software business. When Hewlett-Packard bought Novadigm this year, it paid a 28 percent premium, and Juniper Networks bought NetScreen Technologies at a hefty 57 percent premium.
For Oracle, that means a winning bid might be somewhere in the $25-to-$30 range, a price that the company could afford -- if Ellison and his board could countenance writing that large a check.
