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16 June--lawsuits fly in Oracle-PeopleSoft merger fracas. (CRM News Review).

PeopleSoft Inc finally brought out the legal guns on Friday, bringing to an end a week of speculation that it would sue Oracle Corp over that firm's $5.1bn hostile takeover bid, alleging the offer is merely "a scheme to freeze customer purchase decisions".

The embattled company claims that Oracle's $16 per share unsolicited bid has more to do with causing PeopleSoft's salespeople problems and interrupting its friendly merger with JD Edwards & Co than it is a serious attempt to acquire PeopleSoft.

Oracle CEO Larry Ellison has said on a number of occasions that PeopleSoft's line will be discontinued, but he has also said that existing customers will be supported. He claims the support and upgrade path under Oracle would be less strict than PeopleSoft's plan.

"By making an offer with the acknowledged intent of eliminating PeopleSoft's business, Oracle seeks to disrupt PeopleSoft's efforts to complete new sales, thus, effectively damaging PeopleSoft's business even if Oracle never buys a single share of PeopleSoft stock," PeopleSoft CEO Craig Conway said in a statement.

The lawsuit alleges unfair business practices, trade libel and tortuous interference with PeopleSoft's customer relationships. It seeks an injunction against the tender offer going ahead. It was not clear if monetary damages are being sought.

PeopleSoft had Monday last week informed Oracle it was to sue, but changed its mind by Tuesday, according to statements made by Oracle, which refers to the lawsuits as "on again, off-again litigation strategy".

Oracle spokesperson Jim Finn said: "This matter must be decided by PeopleSoft shareholders and not by frivolous litigation." He also drew attention to benign-looking discussions between JD Edwards and PeopleSoft disclosed in a regulatory filing.

A PeopleSoft Securities and Exchange Commission filing said the company "is engaged in discussions with JD Edwards regarding the issues presented by the Oracle tender offer and how best to proceed with such acquisition." The talks are confidential.

"As for PeopleSoft's cryptic reference to its secret 'discussions' with JD Edwards, any action by the PeopleSoft board to take the vote away from PeopleSoft shareholders and to further entrench themselves would only compound their abuse of fiduciary duty," Finn said.

JD Edwards is also suing Oracle, claiming over $1.7bn in damages, claiming Oracle is unfairly trying to disrupt the acquisition contract between JD Edwards and PeopleSoft. The company is also seeking an injunction.

Oracle accused JD Edwards of filing suit purely as a "smokescreen" and drew attention to revelations earlier that day that PeopleSoft CEO Craig Conway stands to collect a substantial golden parachute if he is fired, resigns, or the firm is bought.

Oracle's Finn said in a statement: "This is a tactic designed solely to distract PeopleSoft shareholders from making a choice while PeopleSoft management remains intent on keeping hefty pay packages and neglecting the best interests of shareholders."

In a Securities and Exchange Commission filing earlier that day, PeopleSoft revealed that Conway will get two years' salary, bonuses, and the ability to immediately vest his millions of PeopleSoft share options.

Previously, the deal was for one year's salary. The company said in the filing that the decision to sweeten the already pretty extravagant deal was made prior to June 6, when Oracle's bid was announced.

In trading Friday, PeopleSoft shares lost 2.6% of their value, ending the day at $16.92, bringing the company's market value closer to Oracle's $16 bid. That bid was a 6% premium when it was announced, but PeopleSoft's shares went up in anticipation that Oracle would be forced to increase the offer.

PeopleSoft also disclosed Friday that the first wannabe class-action lawsuit has been filed. Thomas Nemes "who purports to be a stockholder" filed suit alleging executives breached their fiduciary duties in their response to Oracle's offer.

PeopleSoft denies Nemes has a merit-worthy case. The plaintiff is seeking damages (interesting, considering PeopleSoft shares are up since the offer was made) and an "injunctive relief" against the company.
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Publication:MarketWatch: CRM
Date:Jun 24, 2003
Previous Article:16 June--Oracle vs PeopleSoft: what a difference a year makes. (CRM News Review).
Next Article:17 June--PeopleSoft and JDE take shareholders out of the equation. (CRM News Review).

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