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Business software developer PeopleSoft Inc. announced late Tuesday that antitrust staff at the U.S. Department of Justice have recommended that regulators file suit to block Oracle Corp.’s hostile takeover attempt of its long-time rival. PeopleSoft said it was informed of the news late Tuesday, and that the staff suggestion has been submitted to the office of the assistant attorney general for further review. The Pleasanton, Calif.-based company was also told the Justice Department would make its final decision on the acquisition no later than March 2. PeopleSoft and Oracle could not be reached for comment Tuesday night. But Oracle spokesman Jim Finn said Tuesday that his company believes the merger will eventually be approved after a complicated and prolonged Justice Department review, according to Reuters. The staff recommendation will be forwarded to Assistant Attorney General R. Hewitt Pate, the highest-ranking U.S. antitrust official, in the coming weeks, and Pate will decide whether to allow Oracle’s $9.4 billion hostile bid or sue to block it. Last week Redwood Shores, Calif.-based Oracle upped its bid for PeopleSoft to $26 a share, or $9.4 billion. On Monday PeopleSoft’s board again rejected the offer, citing antitrust concerns and too low a price. “We believe on both fronts — on antitrust and valuation — that Oracle’s offer undervalues the company,” PeopleSoft spokesman Steve Swasey said earlier Tuesday. “This is all part of [Oracle's] ongoing plan — whether its proxy fight or tender offer — to attempt to harm our business.” In other news, Oracle chief Larry Ellison is stepping up the pressure on PeopleSoft Inc.’s shareholders, personally urging them to vote for his company’s hand-picked slate of five directors for PeopleSoft’s board, according to a filing Tuesday with the U.S. Securities and Exchange Commission. In a letter to shareholders, Ellison is asking them to support four replacement candidates for PeopleSoft’s board and vote to add another independent candidate — Duke Bristow, an economist at the UCLA’s Anderson School and director of the Corporate Governance Program — to the company’s eight-member slate. In the letter, Ellison said Oracle believes PeopleSoft’s current directors “are not acting, and will not act, in your best interests.” Oracle spokesperson Jennifer Glass said the letter will be sent to PeopleSoft shareholders after Oracle receives approval for the document from the SEC. “Specifically, the PeopleSoft Board continues to refuse to meet with us to discuss the merits of the transaction, despite the fact that our offer represents a premium of approximately 19% over PeopleSoft’s closing price on Monday, February 3, 2004,” Ellison wrote. Oracle has agreed to pay each independent board candidate $30,000 for his service, the company said in a preliminary proxy statement also filed Tuesday. Ellison’s letter is timely because his company expects a final ruling on the merger soon by the DOJ’s assistant attorney general and the European Commission. PeopleSoft’s annual shareholder meeting, at which stockholders will vote to retain current directors or elect Oracle’s picks, is scheduled for March 25. Shareholders of record as of Tuesday are eligible to vote at the meeting. In its preliminary proxy statement, Oracle said the PeopleSoft board has also refused to amend its poison pill, a current stumbling block to the deal. Oracle has sued PeopleSoft in Delaware Chancery Court to remove the rights plan, and that litigation is still ongoing. “The Board appears to [be] behaving as PeopleSoft CEO Craig A. Conway predicted back in June 2003 when he stated — within hours of the announcement of the offer — that there was ‘no price’ under which the PeopleSoft Board would recommend the Offer to Stockholders,” Oracle said in its proxy. Oracle is also miffed at what it calls PeopleSoft’s “golden parachutes” for its executives. These lucrative severance packages kick in for Conway and other company officials upon a change in control of the company. “Oracle believes that these arrangements could result in a total CEO package valued at more than $60 million,” the company said in its proxy. Swasey said Conway’s severance package was created prior to Oracle’s initial hostile bid for PeopleSoft last summer. In addition, in its proxy Oracle said it is soliciting shareholders’ votes to tender their shares because of PeopleSoft’s “unprecedented” customer assurance program, which offers money-back guarantees to PeopleSoft’s customers if their products aren’t supported should a takeover occur. PeopleSoft has estimated these rebates could total $1.55 billion, and under signed contracts the acquiring company would be responsible. “Such triggers limit the flexibility of any new PeopleSoft board or management to operate the business following a change in control,” Oracle said. Swasey said the rebate program was merely put in place to “protect the security of the investment that our customers make” and is only triggered if the acquiring company won’t support and develop add-ons to products as PeopleSoft would. “There’s zero liability to PeopleSoft, because we intend to support our software,” Swasey said. “We believe and our board of directors believes that PeopleSoft has a better plan for its shareholders.” Copyright �2004 TDD, LLC. All rights reserved.

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