Oracle: $5.1B bid for PeopleSoft good for shareholders and users

CEO Larry Ellison called a PeopleSoft/J.D. Edwards merger 'risky'

Oracle Corp.'s $5.1 billion bid for enterprise software provider PeopleSoft Inc. is a move to increase earnings and enhance future versions of its eBusiness Suite, the company said Friday.

The move comes just days after PeopleSoft announced plans to acquire Denver-based J.D. Edwards & Co. (see story). However, Oracle said in a statement that the J.D. Edwards buy will be subject to review once Oracle acquires Pleasanton, Calif.-based PeopleSoft.

Oracle plans to make a cash tender offer to acquire all outstanding shares of PeopleSoft for $16 per share, or $5.1 billion, on Monday. The offer will be subject to customary conditions, Oracle said, including a redemption or amendment to PeopleSoft's shareholders' rights plan.

PeopleSoft stock was selling at $15.11 per share at the close of business yesterday, making Oracle's $16 offer a slim 5% premium for PeopleSoft shareholders.

Oracle was up 9 cents per share, trading at $13.35, an increase of 0.67% at midmorning today.

In a conference call discussing the offer, Oracle Chairman and CEO Larry Ellison said the decision to bid for PeopleSoft grew from talks with PeopleSoft President and CEO Craig Conway last year to merge the application businesses of the two companies. The companies were unable at the time to agree on a structure for combining their businesses.

He characterized today's offer as an "alternative partnership than what [PeopleSoft's] management has proposed."

Asked whether PeopleSoft's management team had reviewed Oracle's latest proposal, Ellison declined to comment, referring to his conversations with Conway last year as evidence of interest in a merger within PeopleSoft's senior ranks.

PeopleSoft spokeswoman Kara Wilson declined to comment to Reuters but said she wasn't aware of the offer by Oracle.

While saying that Oracle was interested in keeping the option of a merger with J.D. Edwards open, Ellison characterized the proposed J.D. Edwards/PeopleSoft deal as a "risky merger" and said Oracle's offer is a better deal for PeopleSoft customers and shareholders.

J.D. Edwards declined to comment on Oracle's offer. "We have not seen the details of the tender offer," said Victor Chayet, J.D. Edwards' director of communications. "We have to wait until Oracle files on Monday. All we've heard is what they said on the conference call. We'll have to wait until we see the [offer] filing for further comment."

As opposed to the proposed PeopleSoft/J.D. Edwards deal, Oracle's offer would immediately benefit PeopleSoft shareholders and customers, Ellison said. "This deal works financially and technically for PeopleSoft customers and Oracle customers. We'll have clever people from both companies working on a next-generation product, and that's a good thing for PeopleSoft customers and shareholders."

Asked about the 5% premium on PeopleSoft's stock, given the likely boon in licensing revenue Oracle would realize from the merger, Ellison said the offer price was based on the recent performance of PeopleSoft, citing the company's declining revenue and sinking stock price. "We feel that the $16-per-share offer is a safer road for PeopleSoft shareholders, and a good thing to do would be to take that $16 and invest it right back in the new company," he said.

Although Oracle has no plans to actively sell PeopleSoft products, the company will provide enhanced support for them and incorporate some features into its own proprietary offerings, Oracle said in its statement.

To encourage acceptance for the offer among PeopleSoft customers, Ellison proposed a variety of measures to sweeten the deal, including the removal of PeopleSoft's December support cutoff for the PeopleSoft 7 enterprise applications suite, an indefinite extension of support for PeopleSoft 7 and a removal of additional license fees to upgrade from PeopleSoft 7 to the PeopleSoft 8 suite.

While Oracle would continue to develop the PeopleSoft product line, Ellison suggested that the combined company would also make it easier for PeopleSoft customers to move to Oracle's eBusiness Suite platform.

Portraying PeopleSoft as a company that was struggling to maintain momentum and would be weighed down by a complicated merger with J.D. Edwards, Ellison said the proposed union of PeopleSoft's and Oracle's application businesses would shore up the PeopleSoft product against competition from SAP AG and Microsoft Corp. "In terms of the technology's future, PeopleSoft customers will have 5,000 or 6,000 developers working on a next-generation product, and that's something they wouldn't have by continuing down the existing road," he said.

Oracle officials said they hope to close the offer soon and complete the transaction as early as July.

Copyright © 2003 IDG Communications, Inc.

It’s time to break the ChatGPT habit
Shop Tech Products at Amazon