PeopleSoft Inc.'s board on Friday recommended that shareholders reject Oracle's increased takeover bid.

PeopleSoft, Pleasanton, Calif., said the $19.50-a-share offer from the rival software maker faced too many regulatory hurdles and was too low.


PeopleSoft's board said it was rejecting the offer "after careful consideration and acting upon the recommendation of a committee of independent directors." (Read text of statement.)

This week Oracle raised its bid to $19.50 a share, or $6.3 billion overall, from its original $16 offer. PeopleSoft shares closed Thursday at $17.61.

"Oracle's offer undervalues the company and is not in the best interest of PeopleSoft stockholders," PeopleSoft President and Chief Executive Craig Conway said in a prepared statement. "It is highly conditional, faces significant regulatory delays and uncertainty, and threatens serious damage to our business." Mr. Conway also reaffirmed that PeopleSoft is committed to acquiring J.D. Edwards & Co., which it agreed to acquire just days before Oracle launched its bid for PeopleSoft.

In the past week, aside from raising its bid, Oracle has also increased pressure on PeopleSoft by suing the company and its board in Delaware Chancery Court. The Redwood Shores, Calif., company alleged that PeopleSoft executives and directors violated their fiduciary duties by not giving Oracle's offer "due consideration." Oracle is asking the Delaware court to remove PeopleSoft's antitakeover measures, known as a "poison pill."

PeopleSoft said Friday that the Oracle offer isn't in shareholders' best interest, in part because a combination of the two companies would face substantial regulatory delays and, ultimately, the likelihood of rejection. PeopleSoft has argued the deal would significantly reduce competition in the enterprise software industry, where both companies are major players.

"Those delays and uncertainties, combined with Oracle's stated intentions to discontinue PeopleSoft's products, would subject PeopleSoft's business to irreparable damage," the company said in the filing.

PeopleSoft said the revised offer still undervalues the company "based on its financial performance and significant future opportunities, including the value created through the acquisition of J.D. Edwards."

PeopleSoft also said the Oracle offer was "highly conditional," and could be withdrawn at any time.