European antitrust regulators ruled on Tuesday that Oracle can proceed with its hostile takeover bid for PeopleSoft, clearing the last regulatory hurdle in the protracted and tumultuous battle.
The European Commission's decision to permit the deal to move forward had largely been expected. European antitrust regulators appeared to be considering similar key issues as US regulators, who recently lost a battle in US District Court to block the deal.
Mario Monti, the outgoing EC competition commissioner, had previously said he had hoped to make a decision on the matter before his five-year term with the Commission expires on Sunday.
With the last regulatory obstacle out of the way, Oracle needs to find a way around PeopleSoft's anti-takeover measure, otherwise known as a poison pill, to succeed in its $7.7bn bid.
The measure would trigger the release of more stock if a would-be buyer acquires more than a certain percentage of shares, suddenly raising the takeover price to a prohibitive level. The targeted company can waive the pill option at any point and transform the hostile offer into a friendly one, which is Oracle's hope. Board members who take this action usually have done so when offered an acceptable price, or shareholders could elect a new board that's more amenable to a deal.
Oracle has a cash offer of $21 a share on the table, which PeopleSoft's directors have previously rejected. Early Tuesday, PeopleSoft's stock was trading nearly that high, at $20.02 a share. Over the past three months, the shares have risen sharply from $15.97 on 6 August.
Proxy specialists weighed Oracle's next move -- winning hearts and minds in PeopleSoft and beyond.
"Oracle will want to put out a big press release on the Commission's decision, and send a letter to PeopleSoft's board, telling them the only thing that is in the way now is the poison pill," said Tom Ball, a proxy solicitor with Morrow & Co. "They'll want to lay the responsibility of the poison pill at their feet."
Colour of money
PeopleSoft's board, which has rejected Oracle's past offers, showed signs of a softer position during a Delaware Chancery Court trial earlier this month, in which Oracle pressed to remove terms of its rival's customer assurance program and poison pill. PeopleSoft has also fired Craig Conway, its chief executive and brought back founder Dave Duffield to take over as CEO.
During courtroom testimony, Steven Goldby, a PeopleSoft director, said the merger was all about the price tag. "If there had been... and if there ever is an indication that Oracle is willing to pay what we consider to be the right price for the shareholders... and there is a high certainty of being able to close a transaction quickly, I personally would be open to discussions with Oracle."
Oracle has repeatedly said it does not plan to "overpay" for PeopleSoft. And during the Delaware trial, Oracle CEO Larry Ellison stressed that point. Ellison said that Oracle's board has talked about lowering its bid more often than raising it.
But proxy solicitors say it's unlikely PeopleSoft's board will accept $21 a share or less.
"I can't see PeopleSoft's board suddenly embracing a bid at $21, when nothing has changed," Ball said. "The directors will have to find something compelling to change their mind, like a higher bid. They aren't going to accept something they can't support or back up."
The European Commission has jurisdiction because both PeopleSoft and Oracle sell products in Europe.
