NEW YORK (CNN/Money) -
The board of PeopleSoft Inc. rejected the hostile $9.4 billion takeover offer from Oracle Corp., urging shareholders Monday to turn down the premium now being offered by the rival software company.
Oracle, whose standing offer to buy PeopleSoft had been below PeopleSoft's stock price for a number of months, upped its bid last Wednesday by a third to $26 a share. Shares of PeopleSoft fell more than 2 percent in late afternoon trading Monday, to $22.28.
The statement from PeopleSoft's board said its advisers, Citigroup Global Markets Inc. and Goldman, Sachs & Co., have told the board the revised offer price is still inadequate and does not reflect PeopleSoft's real value. It also said it believed the proposed combination would be blocked by antitrust regulators.
The statement said PeopleSoft's stock has been depressed by the hostile takeover effort by Oracle and that once that is removed the stock should trade above the current $26 offer price. It said the company's stock is now at the low end of its historical price compared to forward earnings estimates, and its price-earnings ratio is low compared with similar companies.
"We believe Oracle is using the entire process -- tender offer, antitrust and proxy solicitation -- in an attempt to damage our company," PeopleSoft CEO Craig Conway said in a statement. "Don't underestimate the significant additional value PeopleSoft can create once the disruption from Oracle's hostile activities has ended."
The company has given guidance of 2004 earnings between 92 to 95 cents a share. Analysts surveyed by earnings tracker First Call have a consensus 90-cents-a-share forecast for 2004 earnings and a 12-month target price of $26.
But in a written statement Monday, Oracle spokesman Jim Finn noted that PeopleSoft's first-quarter guidance was lower than analysts were expecting and that PeopleSoft has a "uncertain future as a stand-alone company." Finn added that Oracle believes its $26 a share offer is "full and generous."
Shares of Oracle (ORCL: Research, Estimates) fell about 0.7 percent in late afternoon trading Monday.
So now the deal's fate lies with regulators and PeopleSoft shareholders, who will vote on a slate of Oracle-nominated candidates for PeopleSoft's board at the company's shareholder meeting on March 25.
Analysts said Oracle's new bid has a better chance of being accepted by PeopleSoft shareholders but disputed Oracle's claims about what would happen to PeopleSoft if it remained independent.
In a recent research note, Friedman Billings Ramsey analyst David Hilal said PeopleSoft should trade in the upper $20s by the end of the year even if the deal is not approved.
And Patrick Mason, an analyst with Pacific Growth Equities, said in a note that PeopleSoft is attractive on its own merits and could trade as high as $30.
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