Oracle also announced it would sue PeopleSoft, accused the board of failing to act in the shareholders' best interest, and demanded it remove a "poison pill" obstructing the acquisition.

Authorities in Connecticut, however, said they would sue Oracle to halt the takeover bid on antitrust grounds.

The clash between Oracle and PeopleSoft is shaping up as the most dramatic, tangled takeover battle in the technology world since the Internet bubble burst three years ago.

Oracle increased its bid to 19.50 dollars a share from the initial offer of 16 dollars, two days after PeopleSoft rejected the bid and reaffirmed plans to merge with rival business software group J.D. Edwards.

"In the last few days, Oracle executives have had the opportunity to speak with the holders of a majority of PeopleSoft shares," Oracle chairman and chief executive Larry Ellison said in a statement.

"Many of those shareholders indicated the prices at which they would tender their shares. Therefore, Oracle is raising its all-cash offer to 19.50 dollars per share," Ellison said.

PeopleSoft shares shot up 91 cents or 5.29 percent to 18.06 dollars by mid-afternoon. Oracle rose five cents to 13.40 dollars. J.D. Edwards climbed 21 cents to 14.10 dollars.

"Oracle remains committed to acquiring PeopleSoft and will not be deterred by management's maneuvers to maintain control of a company they do not own," Ellison said.

Oracle said it was filing suit Wednesday in Delaware against PeopleSoft, its board of directors and J.D. Edwards for trying to remove PeopleSoft's shareholders' ability to accept its takeover offer.

The group said it will argue "that PeopleSoft and its board breached their fiduciary duties, including failure to act in the best interest of PeopleSoft's shareholders."

Oracle also demanded that PeopleSoft remove a "poison pill," a tactic in which a company gives shareholders the right to many new shares, making it too expensive for a predator to buy them.

Oracle chief financial officer Jeff Henley said the revised offer for PeopleSoft would still result immediately in higher earnings for Oracle shareholders, after excluding the cost of writing off the excess price paid for PeopleSoft.

Within a year, the takeover would be boosting earnings even under standard accounting rules, he said.

Connecticut tried to block the deal.

The state said it was filing suit in the US District Court at Hartford, Connecticut, alleging an Oracle takeover would flout antitrust laws, and harm the US economy, consumers and competition.

"We are assembling a powerful coalition of states and other consumers that will suffer the same unacceptable costs if this unlawful, anti-competitive takeover is permitted," Connecticut Attorney General Richard Blumenthal said in a statement.

"The takeover would cripple competition, threatening higher prices and lower quality, and cause terrible waste in the human and financial investments already made," he said.

PeopleSoft has already launched its own suit, alleging Oracle's bid was a sham aimed at disrupting its merger with J.D. Edwards.

PeopleSoft said Monday it was speeding up and restructuring its plans for a 1.75-billion-dollar, friendly takeover of J.D. Edwards. It threw in 850 million dollars cash as part of the deal.

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