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Although it’s hard to imagine Larry Ellison, Oracle Corp.’s famously competitive chief executive, ever abandoning his pursuit of PeopleSoft Inc., the business software giant may be preparing to do just that. Bolstering Oracle’s recent statement that it would drop its $9 billion hostile offer if less than half of PeopleSoft shares are tendered by Nov. 19, a company executive confirmed Thursday that Oracle has tapped Latham & Watkins to handle antitrust issues in new acquisitions. The company also has contacted UBS AG and Morgan Stanley about hiring them as financial advisers, the official confirmed. The message for investors? Oracle is willing to walk away from PeopleSoft. Yet with a week remaining until the closing of the tender offer, any of a number of scenarios could play out in the takeover drama, which began more than 16 months ago. If less than half of the Pleasanton, Calif.-based PeopleSoft’s shares are tendered after the deadline, Oracle could keep its word and spend its time and money elsewhere. But should more than 50 percent of PeopleSoft shares back Oracle’s offer, even more possibilities unfold. Now, only about 5 percent of PeopleSoft shareholders have tendered their shares in favor of the deal, and that figure isn’t expected to change significantly until next Friday. That’s because once shares are tendered to a transfer agent, institutional shareholders lose a variety of rights, including the ability to hedge against them. As of June 30, the largest institutional PeopleSoft shareholder was Private Capital Management Inc., with a roughly 8 percent stake. The second largest was French financial firm Axa SA, with a 5.7 percent stake, followed by Los Angeles-based Capital Research and Management Co.’s 5.3 percent and its affiliate Capital Guardian Trust Co.’s 4.4 percent, and Barclays Bank plc, with 4.2 percent. One source said risk arbitrageurs control 105 million PeopleSoft shares, which is more than 27 percent of the company’s outstanding equity. The source expects nearly all the shares will be tendered to Oracle. If Oracle comes through with a majority, it won’t be overwhelming, a source familiar with the tender said. Index funds can’t tender their shares, the source said, PeopleSoft CEO David Duffield would obviously vote his roughly 8 percent stake in the company against the deal, and Oracle does not expect to get an overwhelming number of votes from retail holders. That leaves a “high-water mark” of about 70 percent of PeopleSoft shares tendered in favor of the deal, the source said, predicting Oracle could get roughly 55 percent. Even then, Oracle would still face a major barrier in PeopleSoft’s shareholder rights plan. The companies await a decision by the Delaware Court of Chancery on whether PeopleSoft must rescind the poison pill and a customer assurance program that could greatly increase the cost of buying PeopleSoft. It is unclear when a ruling in the trial, which ended last month, will be handed down. The companies are scheduled to appear before Delaware Vice Chancellor Leo E. Strine Jr. at a Nov. 24 hearing. Oracle has said it would drop the court case should it lose the Nov. 19 tender. That makes sense, according to Lawrence Hamermesh, a professor at Widener University School of Law in Wilmington, Del., because such a development would make Strine unlikely to rule in Oracle’s favor. “If Oracle does not get the majority, then I think it would be striking and certainly tip Strine in favor of supporting PeopleSoft’s position on the poison pill,” he said. Should Oracle’s tender prevail, Strine could interpret that as a mandate from PeopleSoft shareholders in favor of the deal. It is rare, but not unprecedented, for a Delaware court to force a company to redeem its poison pill. “This case is unique in that Strine could get a guide from what shareholders think,” the lawyer said. “The judge might say that if shareholders want this deal as they appear to, PeopleSoft ought to redeem the pill, and he will then order that.” Alternately, one source argued that a strong turnout for Oracle in its tender might persuade PeopleSoft to redeem its pill voluntarily, or at least be prodded by Strine in that direction. Conversely, such a tally might finally bring the target’s board to the negotiating table, said Jim Shepherd, senior vice president at AMR Research in Boston. “PeopleSoft is not going to rescind the poison pill until they think there’s an offer on the table that shareholders should accept,” he said. “They won’t rescind it out of a sense of fair play. It’s there to prevent the company from being sold in a situation where the board of directors feels like it is not an adequate offer.” If Strine leaves the pill in place despite Oracle’s winning a majority in the tendered shares, the company could mount a proxy contest to win the four seats on PeopleSoft’s seven-member board that will be up for grabs next year. – With Cheryl Meyer in Los Angeles Copyright �2004 TDD, LLC. All rights reserved.

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