PeopleSoft has refused to meet with Oracle

Software giant Oracle has predicted its smaller rival PeopleSoft will ultimately accept a takeover deal, but admitted it may need to raise the offer price.

Oracle has also waived previous conditions to the deal, now allowing PeopleSoft to up its own offer in an already pending deal with JD Edwards.

The developments came as US state prosecutors took the unusual step of discussing the implications of Oracle's proposed takeover, ahead of any inquiry by federal regulators.

More than 600 state and local governments use PeopleSoft software and have suggested the deal could cost them millions of dollars.

Sweetening the offer

Oracle's chief executive Larry Ellison said he believed his company's $6.3bn (�3.7bn) hostile offer for PeopleSoft was fair, but could be increased.

Clearly from Larry's standpoint he can pay a lot more than he is currently paying, and he should US fund manager

"Never say never," Mr Ellison responded when asked if he would consider raising the bid.

The world's second-largest software company has already upped its offer from $16 per share to $19.50, but Wall Street analysts have predicted it may need to sweeten shareholders further.

"Clearly from Larry's standpoint he can pay a lot more than he is currently paying, and he should," said a US fund manager.

However, shares in PeopleSoft have remained subdued as some analysts question whether Oracle will still push for a takeover if PeopleSoft buys JD Edwards.

PeopleSoft had already announced a $1.7bn offer for its smaller rival on 2 June, just days before Oracle made its move.

Anti-competitive?

Oracle's bid could also be thwarted by anti-trust regulators.

As software firms battle to consolidate and fight a downturn in demand, competition authorities have raised concerns about the implications for smaller firms.

"We're collecting evidence that confirms the anti-competitive and anti-consumer ramifications of this potential deal," said Connecticut's attorney general Richard Blumenthal.

Connecticut is in the midst of updating its computer systems with PeopleSoft products and has warned a deal with Oracle would cost it "tens of millions of dollars".