Why does PeopleSoft Inc. make its poison pill so hard to find?
If its board perceives the anti-takeover device as being in the interest of shareholders, why don't the directors and management trumpet it? Certainly, the board members ought to be out explaining to shareholders the continuing rationale for the poison pill and its advantages in thwarting a hostile takeover attempt by Oracle Corp., Redwood City, Calif.
Adopted long before the Oracle offer, it is not an anti-takeover measure PeopleSoft executives and its board members have touted in news releases, even though they are using the powerful device to thwart Oracle's hostile takeover offer. Steve Swasey, a spokesman for PeopleSoft, Pleasanton, Calif., when asked, couldn't find information about it on the company's website.
That poison pill is the only thing standing in the way of Oracle's acquisition of PeopleSoft. It's time for PeopleSoft's board of directors to get rid of it. The directors are resisting, however, despite a resounding endorsement shareholders gave to Oracle's offer, tendering 61% of their shares. Oracle can't consummate the transaction so long as PeopleSoft maintains its poison pill.
Yet, PeopleSoft clings to its poison pill — what it calls a shareholder rights plan.
Poison pills have often been instated in companies by boards of directors for the supposed protection of shareholder value. Kent Hughes, managing director of Egan-Jones Proxy Services, Haverford, Pa., said the poison pill was invented in the 1970s and has survived legal challenges. He said poison pills could be useful to guard against low bids, harmful to shareholder interests. But in the PeopleSoft case, no other bids have been forthcoming after some 18 months of Oracle's pursuit to top its $24-a-share, all-cash offer.
The shareholders in the tender have clearly expressed their views on whether the Oracle offer is adequate.
One of the major campaigns by shareholder activists in recent proxy seasons has been to call for shareholder authorization of poison pills.
This proxy season there were 52 shareholder resolutions on poison pills, down from 91 in 2003, according to Institutional Shareholder Services Inc. The resolutions, generally non-binding, called for a shareholder vote to authorize such anti-takeover devices. The drop in the proposals is a reflection of corporate action to satisfy shareholder demand. At least, 39 proposals received a majority vote. Last year, 65 received a majority vote. More than 40 corporations also redeemed their poison pills last year.
At PeopleSoft's annual meeting last March, there was no such shareholder proposal on its poison pill. The way the pill works: If 20% of PeopleSoft stock is bought, the board could trigger the shareholders' rights plan, which would allow distribution of new stock to existing shareholders.
Oracle has asked PeopleSoft to remove the poison pill, which would trigger the flood of new shares and render an unfriendly takeover too expensive for Oracle to proceed. But PeopleSoft executives have refused the request.
Oracle sued PeopleSoft in Delaware Chancery Court in June claiming the poison pill is an unfair obstacle to a hostile acquisition. Vice Chancellor Leo Strine Jr., who is presiding over the case, could make a ruling in the case the week of Dec. 13, said Jennifer Glass, vice president-global external affairs at Oracle.
The PeopleSoft recalcitrance shows why shareholder activist have targeted poison pills, to keep an entrenched management and board from protecting their interests and prevailing at the expense of shareholders.