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Denver software concern J.D. Edwards & Co. announced late Thursday it had filed two lawsuits against Oracle Corp., accusing the company of interfering with its proposed merger with PeopleSoft Inc. “Oracle’s sole aim is to disrupt a merger that will create value for the key stakeholders of J.D. Edwards and PeopleSoft,” Bob Dutkowsky, chairman, president and chief executive officer of J.D. Edwards, said in a statement. “Oracle’s unsolicited offer for PeopleSoft will only destroy value for our companies’ shareholders, customers and employees and the technology community overall. We will not sit by idly while Oracle pursues this arrogant, unlawful and destructive course of action.” J.D. Edwards said it had filed suit in Colorado state court, seeking $1.7 billion in compensatory damages and an unspecified amount in punitive damages. On June 2, Pleasanton, Calif.-based PeopleSoft announced it would acquire J.D. Edwards for $1.7 billion in stock. A few days later, Oracle submitted an unsolicited bid of $5.1 billion in cash, or $16 per share, to buy PeopleSoft. J.D. Edwards also said it is filing suit in a California state court against Oracle and two of its executives, alleging chairman and chief executive officer Larry Ellison and executive vice president Chuck Phillips engaged in wrongful conduct and unfair business practices. J.D. Edwards said it is seeking an injunction that enjoins Oracle from proceeding with its tender offer for PeopleSoft. Oracle spokesman Jim Finn scoffed at the lawsuit. “Clearly PeopleSoft and J.D. Edwards prefer to fight in the courts than let shareholders decide,” he said in a statement. “We believe that this case has no merit whatsoever.” Redwood Shores, Calif.-based Oracle said June 10 that PeopleSoft opted not to begin litigation against its software rival and canceled its plans to appear it court. While J.D. Edwards announced plans to sue Oracle, Ellison and chief financial officer Jeffrey Henley spoke to investors and analysts during the company’s earnings call Thursday. “We don’t believe that PeopleSoft’s management has done a good job for shareholders,” Ellison said, criticizing PeopleSoft for its sinking stock price prior to Oracle’s offer. “Things are getting worse, not better, at PeopleSoft.” Ellison noted license sales at PeopleSoft dropped almost 40 percent in the most recent quarter, on a year-over-year basis. And Oracle, he said, has recently lured numerous customers away from PeopleSoft and other rivals, including Merrill Lynch & Co., Forsythe Solutions Group Inc. and Qatar Airways. What’s more, he said, J.D. Edwards also lost money in the most recent quarter. “Merging a company that is down 39 percent with a company that is losing money is a risky proposition for shareholders,” he said. Ellison said he is confident PeopleSoft shareholders will have the final word. He also said his company would continue to scout out other acquisitions in the applications and technology arena. “[If] it’s a good deal for shareholders, it’s something we’re likely to do,” he said. Oracle posted a net income of $858 million, or 16 cents per diluted share, for the fourth quarter. Total revenue rose 2 percent to $2.83 billion. The company reported cash and cash equivalents of more than $4.7 billion as of May 31. In a separate conference call Thursday afternoon, PeopleSoft chief financial officer Kevin Parker reiterated that his company’s board of directors rejected Oracle’s bid. “The board concluded that the offer would undoubtedly face lengthy antitrust scrutiny with the significant likelihood that approval would not be granted,” he said. “The unsolicited and hostile nature of the offer combined with Oracle’s statements is designed to disrupt PeopleSoft’s strong momentum to the detriment of our customers,” he added. PeopleSoft and J.D. Edwards have vowed to plow ahead with their merger. PeopleSoft CEO and president Craig Conway said his company’s customers have been sympathetic, supportive and in some cases incensed. He said his company’s board of directors went through an extensive and “exhaustive” process before deciding to reject Oracle’s offer. “From our point of view, this process is at an end,” he said. “[The board's] evaluation is over and we’ve got business to do.” Some shareholders were equally relieved by PeopleSoft’s decision to reject the bid. “It would take a much more substantial development than what Oracle has so far proposed, to have any impact on the merger of PeopleSoft and J.D. Edwards,” said one investor in both companies, who asked to remain anonymous. Analysts believe shareholders may still vote for an Oracle-PeopleSoft deal, and that Ellison may up his offer. “Shareholders like cash, that’s for sure, and I’d be surprised if Oracle started offering part stock, because a cash deal is much more compelling,” said Kimberly Caughey, equity research analyst at Parker/Hunter Inc. in Pittsburgh. “At some point we’ll have to say, ‘Thank you very much, and here we go, Oracle.’” Eric Upin, managing director and software analyst at Wells Fargo Securities LLC, said he also believes Oracle is serious about submitting a bid. “It would be a very good, big feather in Oracle’s cap,” he said of the transaction. Upin predicts that some back-room dealing among Oracle and PeopleSoft executives or bankers could occur, and that J.D. Edwards could be “orphaned or remain independent.” “There could be other suitors or anything could happen,” he said. “No one is going to reveal their hand. There’s a lot of poker playing going on here.” Citigroup Global Markets Inc. and Goldman, Sachs & Co. are PeopleSoft’s financial advisers on the Oracle deal. Gibson, Dunn & Crutcher is the company’s legal adviser. Credit Suisse First Boston and Davis Polk & Wardwell are advising Oracle. Copyright �2003 TDD, LLC. All rights reserved.

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