New York, Feb 10: Software provider PeopleSoft Inc. on Monday rejected a sweetened USD 9.4 billion takeover offer from larger rival Oracle Corp., saying the hostile bid still undervalues the company. PeopleSoft, based in Pleasanton, California, said its board considers the USD 26-per-share bid inadequate, even though it represents at 33 percent increase over Oracle's previous offer of USD 19.50 per share. It urged shareholders to reject the bid. An Oracle spokesman said the company stands by its offer. "Given PeopleSoft's uncertain future as a stand-alone company and the fact that, for the first quarter, PeopleSoft guided analysts below the consensus estimates, Oracle believes that its offer is full and generous," said Oracle spokesman Jim Finn. Oracle, the world's No. 2 software maker, raised its bid last week, saying it was its best and final offer. The rejection prolongs a contentious eight-month takeover battle that has pitted two former colleagues -- Oracle Chief Executive Officer Larry Ellison and PeopleSoft CEO Craig Conway used to work together at Oracle -- against each other. In the battle, Redwood Shores, California-based Oracle has proposed replacing five of PeopleSoft's board members with its own nominees at the PeopleSoft annual meeting on March 25. With PeopleSoft's rejection of the sweetened takeover offer, the vote at the meeting takes on added significance. Until the bid was raised, PeopleSoft shares had been trading above Oracle's offer price for three months, a sign investors believed either no deal or a higher price was in the offing. Once Oracle raised its offer, PeopleSoft shares rose only slightly, signaling investors remained wary about the deal's prospects. The two sides are awaiting a US Department of Justice ruling on whether a merger would be anti-competitive. PeopleSoft contends it would be, while Oracle's raised bid was viewed by some as a sign the pursuer was confident the deal would be allowed to proceed. Regardless of the DoJ ruling, PeopleSoft said, the Oracle offer "does not begin to reflect the company's real value." "Don't underestimate the significant additional value PeopleSoft can create once the disruption from Oracle's hostile activities ends," it said. Specifically, PeopleSoft noted its current share price of USD 22.75 represents the low end of its historical valuation range and lower multiples than its peers. It said this is due primarily to the uncertainly created by the Oracle bid. Given its current 2004 earnings guidance of 92 cents to 95 cents per share, PeopleSoft said typical valuation multiples would place its stock price at a level that "far exceeds the offer price, even before taking into account a control premium." The company contends a majority of analysts who published notes prior to Oracle's raising its takeover bid valued PeopleSoft on a stand-alone basis at USD 26 per share. "Everything I've heard from Oracle indicates that they are serious about the USD 26 limit," said Brendan Barnicle, an analyst at Pacific Crest Securities. "I have a USD 30 12-month price target on PeopleSoft, so I can certainly support a higher price than USD 26. But I do think USD 26 shows a good faith offer. It certainly would be a place to start negotiations." Eric Upin, an analyst at Wells Fargo Securities LLC, said he would not be surprised to see Oracle increase its offer if PeopleSoft were to show a willingness to negotiate a friendly offer. "Whether you agree or disagree, we see PeopleSoft as viewing the company as being more valuable than Oracle's current price (offer)," he said. "There is a very emotional aversion toward Oracle. "I think there is this view that, regardless of the price, it's selling your children into indentured servitude," he added. Citigroup and Goldman, Sachs & Co. provided PeopleSoft with financial advice on the revised bid. PeopleSoft shares closed at USD 22.22 on the Nasdaq, down 2.3 percent. They were at USD 22.25 in after-hours trade. Bureau Report