Oracle to drop PeopleSoft suit if tender fails

Oracle notified Delaware's Court of Chancery of plans to drop a lawsuit pending against PeopleSoft if PeopleSoft shareholders reject Oracle's tender offer. The notification is a sign that Oracle is serious about its current offer being the final one.

Redwood Shores, California-based Oracle has extended its hostile takeover bid for control of PeopleSoft more than a dozen times since June 2003. Earlier this month, however, Oracle raised its cash offer from US$21 per share to US$24 and said that if a majority of PeopleSoft's shares have not been tendered by midnight Nov. 19, it will allow the offer to lapse.

Oracle sent a letter on Friday to Judge Leo Strine, who is presiding over the Chancery Court case, asking him to postpone a scheduled hearing until after the Nov. 19 tender deadline.

"If less than 50 percent of PeopleSoft shares are tendered by that date, then Oracle's tender offer will end," the company wrote. "In that event, Oracle will drop its claims before this Court."

Oracle had asked the Chancery Court to void PeopleSoft's "poison pill," a provision in its bylaws allowing it to dilute its shares and block a hostile takeover. It also asked the court to constrain Pleasanton, California-based PeopleSoft's "customer assurance program," a guarantee added to some customer contracts offering substantial damages payments if PeopleSoft were acquired by another company that disrupts its development and support plans.

If PeopleSoft shareholders accept Oracle's offer, now valued at US$8.8 billion, the company said it will continue to lobby the Chancery Court to strip PeopleSoft's poison pill. Should the court decline to do so, Oracle's next option would be to back a dissident slate of nominees to replace some members of PeopleSoft's board of directors at the company's next shareholder meeting.

Whatever happens as Oracle's bid deadline passes, the two companies appear likely to remain locked in acrimonious legal wrangling for years to come. A trial is scheduled to start next year on a lawsuit in California's Alameda County Superior Court, where PeopleSoft will air its allegations that Oracle employed unfair tactics and committed libel while pursing its takeover bid. PeopleSoft spokesman Steve Swasey said that even if Oracle withdraws its bid, PeopleSoft intends to continue its Alameda case.

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