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When Larry Ellison’s Oracle launched a hostile bid for PeopleSoft in the summer of 2003, many on Wall Street thought it was a stunt.
The target’s board rejected the offer, adopted a poison pill defence to deter the bidder, sued Oracle, complained to antitrust regulators and even promised customers eye-watering compensation if the deal ever closed. Eighteen months later, the billionaire founder of Oracle prevailed. PeopleSoft was gone.
That battle, one of the longest and most bruising hostile takeovers in US corporate history, offers a useful guide for Larry’s son David as he attempts his own audacious manoeuvre: a hostile bid for Warner Bros Discovery after the company rebuffed Paramount and embraced Netflix instead.
The parallels are not perfect. But there are some possible lessons. Perhaps the most important one is that hostile does not mean cheap. Oracle won PeopleSoft by paying up. Larry Ellison ultimately raised his offer from $16 a share to $26.50 before PeopleSoft finally capitulated.
That is what makes valuation — not just process — decisive. WBD’s board has made clear that it prefers a proposal by Netflix that values its streaming and studio assets $83bn in cash and stock, against Paramount’s $108bn hostile offer for the whole company. But Paramount argues its all-cash $30-per-share offer for the entire company is superior to Netflix’s $27.75-per-share bid.The dispute centres on how to value what remains: the legacy television networks Netflix would leave behind.
Several shareholders the FT has spoken to say they prefer Paramount’s all-cash offer in principle, but also see an opportunity to extract more value. As one put it: “I want cash so that we can move on. The idea that Ellison is not serious about the deal is a joke.”
Robert Bierig, portfolio manager at Oakmark Fund at Harris Associates, a top ten shareholder in WBD, says he supports the Netflix offer but would be open to Paramount if it proposed better terms. “At this point, the ball is in Paramount’s court,” says.
David Ellison may already be in a stronger position than his father was in 2003. The Paramount bid is all-cash, fully financed and carries a clear headline premium, even if WBD disputes elements of its structure. The political winds in Washington are also far less hostile to consolidation than they were during the Biden administration.
But there was no rival bidder waiting in the wings of PeopleSoft in 2003. Oracle was the only game in town. WBD’s directors, by contrast, can credibly argue they are choosing between two viable outcomes rather than simply digging in.
David Ellison might need to heed another lesson from the PeopleSoft saga — patience. Oracle did not win PeopleSoft by persuading shareholders to tender their shares early. For most of the process, hardly any did. The poison pill — which would have diluted the stake of a bidder above 20 per cent by issuing new shares at a discount to existing shareholders — made that pointless. Instead, Ellison senior used the tender offer as a pressure device, forcing the board to justify its resistance month after month as the share price hovered below the bid.
The campaign reinforced Larry Ellison’s image as an acquirer who does not blink. He was willing to litigate, wait out regulators and make boards uncomfortable for as long as it took. Over time, shareholders assumed that resistance merely delayed the inevitable. Endurance paid off. David Ellison does not yet have that record, although he fought for more than a year against rival suitors to buy Paramount.
The PeopleSoft battle also has lessons for WBD. One is that an aggressive defence can backfire. PeopleSoft’s most notorious tactic was the “Customer Assurance Program”, which promised customers multiples of their licence fees if Oracle cut support after an acquisition. Designed to make the target radioactive, it instead became a symbol of managerial entrenchment and was ended after shareholder complaints. WBD has not gone that far. But its argument that Netflix is the safer buyer regardless of price carries a similar risk. Boards will come under pressure if they disregard a large premium indefinitely without compelling evidence.
If Paramount succeeds, it will not be because WBD shareholders rush to tender against management, but because the board concludes that resisting a clearly superior offer no longer serves its fiduciary duty. History suggests that moment rarely arrives without a higher price. So Ellison junior may need to take note of his father’s experience on this.
jfk@ft.com