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PeopleSoft shells out $70m fighting Oracle

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Peoplesoft,
Hostile Bid,
Cost,
Oracle

Dawn Kawamoto CNET News

Published: 10 Aug 2004 09:45 BST

PeopleSoft offered a glimpse at the price of blocking Oracle's hostile takeover bid in a regulatory filing Monday.

The year-long effort to fend off Oracle's unwelcome attempt to buy PeopleSoft has not come cheaply for the business applications software vendor. Recently, that battle has been fought by Oracle and the Justice Department in an antitrust case in San Francisco. As the government and both software firms await the decision of US District Court Judge Vaughn Walker, PeopleSoft says its costs continue to rise.

"We incurred over $70m in investment banking, legal and other fees, and (devoted) a significant amount of internal resources to respond to the tender offer and the related lawsuits," PeopleSoft said in its filing with the Securities and Exchange Commission. The expense covers the period from June 2003, when Oracle announced its bid, to 30 June of this year.

Oracle spent $59.7m on the PeopleSoft tender offer during its 2004 fiscal year, which began 31 May, 2003. In its annual regulatory filing with the SEC, the database maker noted the cost of making the tender offer was one of three main contributors to the increase in general and administrative expenses for the year.

And the legal cost for both parties continues to mount.

Oracle, fighting to lift PeopleSoft's antitakeover "poison pill" policy, is scheduled to go to trial on 27 September in the Delaware Chancery Court, according to PeopleSoft's regulatory filing. Regardless of a favourable ruling by Judge Walker, Oracle would still need to remove PeopleSoft's "poison pill," which makes a hostile bid cost-prohibitive by releasing more shares into the market.

Oracle also faces a lawsuit in Alameda County Superior Court, across the bay from San Francisco. PeopleSoft is alleging unfair business practices. That trial is scheduled to begin on 1 November. And the European Commission, the antitrust regulatory body for the European Union, is reviewing the proposed acquisition, as well. A ruling by the Commission blocking the merger could also kill the deal.

PeopleSoft also disclosed in its regulatory filing that another defence against a takeover, its controversial customer assurance guarantee programme could add another $2.02bn to Oracle's cost to acquire the company.

The customer assurance guarantee programme promises PeopleSoft customers that they will be paid more than five times the cost of their software applications license if someone buys the company and discontinues or reduces support, licensing updates or new releases of PeopleSoft's products. Such payouts would cost Oracle billions of dollars.

PeopleSoft shareholders filed a lawsuit opposing the "poison pill," and later added opposition to the customer guarantee programme. The company and its investors announced a settlement in late May that is still awaiting the judge's approval.