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PeopleSoft sued over refund offer

Seattle, Nov. 8 (Reuters): PeopleSoft Inc’s offer to indemnify customers in the event of a takeover by Oracle Corp will cost too much and prevent stakeholders from accepting a sweetened offer, a group of PeopleSoft’s shareholders argued in a lawsuit made public on Friday.

In a motion filed in the Delaware Court of Chancery on Thursday, a group of shareholders argued that PeopleSoft’s ‘customer assurance programme’ promising to pay back customers’ money in the event of a takeover was a “nonredeemable poison pill that is draconian in its effect”.

The Pleasanton, California business software maker, adopted its customer refund programme in June to prevent customers from defecting in the face of Oracle’s unsolicited takeover offer, since raised to $7.3 billion.

Earlier this month, PeopleSoft chief financial officer Kevin Parker said the company had changed the terms of the refund programme that would double potential customer payouts to a total of near $800 million. PeopleSoft’s attorneys have seen the lawsuit and determined that it was without merit, said company spokesman Steve Swasey.

“We will defend it aggressively,” Swasey said.

In a filing with the Securities and Exchange Commission last week, PeopleSoft detailed changes to its customer assurance programme, promising to pay between two and five times a customer’s software licence fees if PeopleSoft is acquired within two years, instead of one year, and if the buyer reduces product support within four years, instead of two.

Oracle, which extended its offer to acquire PeopleSoft earlier in October, weighed in on the shareholder lawsuit, calling the expanded customer assurance programme “management entrenchment at its worst.” “These modifications to PeopleSoft’s so-called Customer Assurance Programme are not about protecting customers,” Oracle spokesman Jim Finn said in a statement.

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