Oracle wins battle for PeopleSoft

Giant merger approved by PeopleSoft's board, Oracle says it plans to continue developing PeopleSoft products
||Last Updated: 09/06/2005

After 18 months of resisting Oracle’s overtures, PeopleSoft has finally succumbed.

Oracle announced earlier today that it has signed a definitive merger agreement to acquire PeopleSoft, Inc., in a $10.3 billion deal (all figures US) or $26.50 per share. The transaction has been approved by the boards of directors of both companies and should close by early January.

The price offered by Oracle topped what it said in October was its best and final offer of $24 per share.

Oracle, based in Redwood Shores, Calif., and PeopleSoft, based in Pleasanton, Calif., are two of the largest players in enterprise application software.

“Today we announced both a great quarter and the agreement to acquire PeopleSoft,” said Oracle chief executive officer Larry Ellison. “This merger gives Oracle even more scale and momentum. The real highlight of our most recent quarter was the 57 per cent growth in our applications business, and this merger is going to make that applications business bigger and stronger.”

Ellison said the merger between the software giants will work.

“We will have more customers, which increases our ability to invest more in applications development and support,” he said. “We intend to enhance PeopleSoft 8 and develop PeopleSoft 9 and enhance a J.D. Edwards 5 and develop a J.D. Edwards 6. We intend to immediately extend and improve support for existing J.D. Edwards and PeopleSoft customers worldwide.” (PeopleSoft and J.D. Edwards merged recently in a $1.8 billion deal.)

‘Long, emotional struggle’

George Battle, chairman of PeopleSoft’s transaction committee, said the price offered by Oracle was right and represented a good value for shareholders.

“After careful consideration, we believe this revised offer provides good value for PeopleSoft stockholders and represents a substantial increase in value from October,” said Battle. “PeopleSoft is a strong and vibrant company. Our fourth quarter numbers have been running ahead of plan. Our ability to deliver this shareholder value would not have been possible without the relentless efforts of our employees. This has been a long, emotional struggle and our employees have consistently performed well under the most challenging of circumstances.”

Oracle and PeopleSoft both agreed to stay all pending litigation and will dismiss such litigation permanently once the deal is closed.

Oracle made its first overture to PeopleSoft in June 2003 with a $5.1 billion offer, or about $16 per share. It’s been a bumpy — and interesting — ride since. When Oracle made its first announcement, then PeopleSoft CEO Craig Conway called it “horribly unprofessional.” Conway said Oracle was simply trying to ruin PeopleSoft’s merger with J.D. Edwards.

“I think (Ellison) saw a wedding and he showed up with a shotgun because he didn’t get invited,” Conway said. “It’s a page straight out of Genghis Kahn.”

But as the months passed, it became clear that Oracle’s deal was for real as it consistently upped its offering, finally settling in at $10.3 billion, more than double the original tender.

Some experts have said the deal — and the way Oracle aggressively pursued it — shows that the software business is a no-growth industry. Eugene Walton of Walton Holdings, an independent technology stock research firm, told the Reuters news agency that this deal could be a harbinger for software firms.

“Oracle has given us the game plan on how to consolidate,” said Walton. “If they can get PeopleSoft this way, then anything goes. No software company can protect themselves from not being acquired.”

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