PeopleSoft Agrees to Oracle Deal

Companies agree to end all pending litigation brought by Oracle over PeopleSoft's poison pill, which would have made a potential deal much more fin...
Stephen TaubDecember 14, 2004

Finally! After 18 months, PeopleSoft Inc. has agreed to be acquired by Oracle Corp. for $26.50 a share in cash, or around $10.3 billion, after rebuffing several offers and being taken to court for instituting a controversial takeover defense.

The price tag is nearly 66 percent higher than Oracle’s initial $16 per share bid in June 2003 and 75 percent higher than PeopleSoft’s market value before Oracle formally launched its takeover battle, according to reports.

The deal has been approved by the boards of directors of both companies and should close by early January. In addition, the companies agreed to end all pending litigation brought by Oracle over PeopleSoft’s poison pill, which would have made a potential deal much more financially prohibitive.

“After careful consideration, we believe this revised offer provides good value for PeopleSoft stockholders and represents a substantial increase in value from October,” said A. George “Skip” Battle, chairman of PeopleSoft’s transaction committee, in a statement. “PeopleSoft is a strong and vibrant company.”

“This merger gives Oracle even more scale and momentum,” said Oracle chief executive officer Larry Ellison, in a statement. “This merger works because we will have more customers, which increases our ability to invest more in applications development and support.”

The newly merged company will have more than 22,750 customers and more than 53,800 employees. Oracle also inherits more than $2 billion in annual revenue, which will put it in a better position to challenge German software giant SAP AG in business-applications software, according to The Wall Street Journal.

Ellison added that Oracle intends to “immediately extend and improve support for existing JD Edwards and PeopleSoft customers worldwide,” addressing long-held fears that those products would not be supported by Oracle after a takeover. In fact, Bloomberg pointed out, the deal lessens Oracle’s reliance on the database software that provides 80 percent of its revenue.

Under the agreement, Oracle is amending its current tender offer for all outstanding shares of PeopleSoft to expire at midnight, December 28.

The share price of each company jumped more than 10 percent on the news. Although the acquirer’s stock typically falls when a merger is announced, Oracle also beat profit forecasts by 3 cents per share according to the Associated Press. The AP added that the Dow finished at its highest close since March; the S&P 500, at its highest since August 2001; and the Nasdaq, at near its high for 2004.