Oracle puts in $5.1bn bid for PeopleSoft

You turn your back on enterprise software for a minute and look what happens...
Written by ZDNet Staff, Contributor

You turn your back on enterprise software for a minute and look what happens...

Oracle has announced a surprise $5.1bn takeover bid for enterprise software maker PeopleSoft, only a few days after PeopleSoft said it was acquiring rival JD Edwards for $1.7bn.

Oracle is offering $16 per share for each share of PeopleSoft, a roughly 6 per cent premium over PeopleSoft's closing price on Thursday of $15.11. The official offer is expected to be made on Monday morning.

A PeopleSoft representative said the company had no immediate comment.

Oracle said if it completes the acquisition of PeopleSoft, it would "review whether, and on what terms" it would support the JD Edwards deal.

"The acquisition of PeopleSoft will immediately make Oracle an even more profitable and competitive company," Oracle CEO Larry Ellison said in a press release. "Although we will not be actively selling PeopleSoft products to new customers, we will provide enhanced support for all PeopleSoft products. Furthermore we will be incorporating the advanced features from the PeopleSoft products into future versions of the advanced Oracle eBusiness Suite," the CEO said.

Ellison revealed in a conference call that PeopleSoft CEO Craig Conway approached him about a year ago "about combining the PeopleSoft application business with the Oracle application business. At that time, a year ago, we were unable to agree on structure."

The Oracle chief also said that his company "continued to follow PeopleSoft closely" and "thinks the time is right to offer shareholders an alternative plan" to what PeopleSoft's management has presented.

Although Oracle will only file documents relating to the acquisition on Monday, Oracle CFO Jeff Henley said the company expects the deal to go through in July, adding cash is being used to facilitate the speedy closing of the deal.

Earlier this week, analysts said the proposed combination of PeopleSoft and JD Edwards could increase competitive pressures on Oracle and enterprise resource planning (ERP) software market leader SAP.

Oracle, which leads the market for database software, has for years struggled to grow its application software business. Despite those efforts, the bulk of Oracle's revenue still comes from database software. Forrester Research analyst Laurie Orlov noted in a report this week that the company's application software business has declined to 26 per cent of Oracle's overall revenue.

A representative for JD Edwards did not have an immediate comment on the Oracle offer. "The details of tender offer have not been revealed to us. Once they are, we will have additional comment," said spokesman Victor Chayet. "There is a definitive agreement between JD Edwards and PeopleSoft. The details of that agreement are known only to those two parties."

Shares of PeopleSoft rose more than 20 per cent, to $18.34, in pre-market trading. Oracle shares climbed nearly 3 per cent, to $13.75.

The Oracle announcement, coupled with the PeopleSoft and JD Edwards deal announced on Monday, comes after a flurry of consolidation in the normally staid enterprise software market. Invensys on Tuesday said it had sold Baan, the financially troubled software maker, for $135m to a group of investors.

Separately on Friday, Oracle said that it expected to meet or exceed consensus estimates for its fourth fiscal quarter. The company said it should post earnings per share of 14 cents to 15 cents.

Oracle is the world's second largest software maker, posting sales of $9.7bn in 2002. The combination of PeopleSoft and JD Edwards would create a company with annual revenue of $2.8 billion.

Margaret Kane and Mike Ricciuti writes for CNET News.com.

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