The tea leaves on Oracle's takeover plans for PeopleSoft have never been harder to read than they are right now.
For most of the 16 months Oracle has waged its campaign to win control of its rival, the chances of the deal's completion have been firmly in the "unlikely" category. The expected opposition of antitrust regulators was one factor, but the biggest obstacle for Oracle was the resistance of PeopleSoft's management. So long as PeopleSoft was led by a chief executive officer (CEO) claiming the company wasn't for sale to Oracle at any price, Oracle had little hope of successfully acquiring PeopleSoft through its tender offer to shareholders, now valued at $7.7 billion. Thanks to PeopleSoft's poison pill, the company's board of directors can essentially deflect Oracle's advances for as long as they remain in office.
But Friday's firing of Craig Conway as PeopleSoft's CEO, followed by PeopleSoft director Steven Goldby's testimony this week that he would be open to discussions with Oracle if the price were right, has changed the dynamics of the situation between Oracle and PeopleSoft from standoff to detente.
Analyst guesses are all over the map about how likely the deal is now to be completed. On the one hand, the new CEO selected by PeopleSoft's board strikes long-time company customers and observers as an odd choice if the board hopes to quickly strike a deal with Oracle. David Duffield, one of PeopleSoft's founders, has a reputation for being deeply committed to PeopleSoft's customers, who overwhelmingly oppose the deal.
On the other hand, with shareholder interest building in the cash Oracle is offering and with antitrust blocks to the deal nearly gone, Oracle's board may not be able to continue its resistance. Goldby said Tuesday that he would consider negotiating with Oracle "if there is ever an indication that Oracle is willing to pay what we consider to be the right price for the shareholders to get for this company, and there is a high certainty of being able to close a transaction quickly." The Yankee Group said in a research note that it believes PeopleSoft's executive team "is clinging to the hope that Duffield can muster support to prevent shareholders from voting in favor of the buyout, but is largely resigned to the takeover."
Goldby's testimony came at the trial taking place this week in Delaware's Chancery Court, which Oracle has asked to void PeopleSoft's antitakeover "poison pill" provision and its "customer assurance program" promising customers compensatory payments if PeopleSoft is acquired by a company that disrupts its product development and support plans. The poison pill provision in PeopleSoft's bylaws allow its board to inflate the company's outstanding shares total and make a hostile takeover prohibitively expensive.
On the first count, Oracle faces long odds, experts say. Delaware courts haven't overturned a poison pill since the late 1980s, according to William Lawlor, a Dechert LLP partner in Philadelphia who leads the firm's mergers and acquisitions group.
But if Oracle opens discussions with PeopleSoft's board and wins their support for the acquisition, the poison pill issue becomes moot. How likely is that? It's impossible to tell.
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