Oracle and Shareholders Gunning for PeopleSoft Refund Deal

PeopleSoft is doing record business, but its poison-pill offer puts an $800 million black hole on its balance sheet

Both Oracle and PeopleSoft shareholders are in disquiet over PeopleSoft’s poison pill, money back deal, and both have asked a court this week to settle the matter—and quickly.

In the deal, PeopleSoft has offered clients a refund of two to five times their software license fee if PeopleSoft is taken over within two years of signing a deal with them, and if support for the product they bought is discontinued within four years.

The offer almost single-handedly allowed PeopleSoft to continue to perform for the past two quarters, keeping its license sales from stalling, while customers waited on the sidelines to see if Oracle succeeded in its hostile takeover plans. Instead, it did record business.

The PeopleSoft shareholders have filed suit to block the offer of more refunds, which have now developed a balance sheet “black hole” of as much as $800 million. Shareholders are effectively stopped from voting for the sale to Oracle as it is likely, given what Oracle has said about how it would merge the product lines, that the refunds could be invoked.

In a parallel legal action, also filed this week, Oracle sought to speed up the Delaware Court that is to hear its own complaint against the refund plan. It says that it may be forced to drop its bid if the plan stays in force. Oracle's bid can’t move on until it gets clearance from the U.S. Department of Justice and potentially from the European Union that made noises about it this week.

Meanwhile PeopleSoft’s share value has taken it way above the $7.3 billion that Oracle is offering—to over $9 billion. The shares headed slightly downwards as rumors circulated that the Justice Department was leaning towards opposing the bid from Oracle.

This week PeopleSoft announced a new version of its Supply Chain management package and announced the general availability of the latest edition of PeopleSoft EnterpriseOne CRM 8.9.

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