Rebel shareholders turn on PeopleSoft

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Rebel PeopleSoft shareholders are trying to overturn the company’s offer to refund customers' licensing fees in the event of Oracle succeeding in its hostile $7.3 billion takeover bid.

Shareholders have filed a motion in the Delaware Court of Chancery seeking a preliminary injunction to stop PeopleSoft from offering the money-back guarantees. They allege that PeopleSoft's "customer assurance program" represents a "non-redeemable poison pill" that effectively prevents PeopleSoft's board from accepting an offer from Oracle or another potential buyer.

PeopleSoft’s own chief financial officer Kevin Parker has estimated that potential liability under the refund program more than doubled in the third quarter and totals nearly $800 million. Refunds of between two and five times a customer's software-license fees will be triggered if PeopleSoft is acquired within two years and any buyer takes certain actions to reduce product support within four years.

Meanwhile Oracle has been back to court to argue that a lawsuit, PeopleSoft filed against it, has no legal basis. PeopleSoft alleges that the database giant engaged in unfair practices by trying to disrupt its business with the buyout bid.

But the company had to admit in court that CEO Larry Ellison was guilty of “puffery” when it argued that public comments that the bid was having an effect on PeopleSoft's business were not actionable because they were "mere puffery".

California Superior Court Judge Ronald Sabraw late Monday ruled mostly against Oracle, clearing the way for the libel and unfair competition suit to proceed.

PeopleSoft claims that one French customer, identified during the hearing only as customer "F", suspended its contract after Oracle launched its takeover offer for PeopleSoft. Sabaw said that he needs to see specific proof that Oracle knew about customer "F".

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