It’s shades of the 1980s.
In a surprise announcement this morning, Oracle Corporation CEO Larry Ellison announced the company was making an unsolicited, cash tender offer to purchase all the outstanding shares of PeopleSoft Inc. Management at the database software specialist indicated it would bid $16 per share for PeopleSoft stock, putting the value of the deal at just over $5 billion.
Based on Thursday’s market closing price for PeopleSoft ($15.10), the bid price represents about a 6 percent premium for PeopleSoft shareholders. In pre-market trading, PeopleSoft share price shot up to over $18.40. Oracle shares were up slightly on the news.
Jeff Henley, Oracle CFO, said: “Given PeopleSoft’s current prospects and plans, we believer our offer presents compelling value to PeopleSoft shareholders. In addition, we expect that the acquisition of PeopleSoft will increase Oracle’s earnings per share from the first combined quarter. We expect there to be substantial cost savings and minimal business integration risk.”
On Monday, PeopleSoft CEO Craig Conway announced that the enterprise software maker was acquiring rival J.D. Edwards in an all-stock deal valued at around $1.7 billion. During a press conference discussing the friendly acquisition, Conway noted that the corporate cultures at PeopleSoft and J.D. Edwards matched up perfectly. “This merger cannot be more compelling,” he noted.
It’s not clear if the same could be said of an Oracle-PeopleSoft deal. Oracle, the world’s number two software maker, has done fine with its database business but has struggled with its enterprise applications offerings. A PeopleSoft deal would position the company to take on the market leader, Germany’s SAP AG.
In the press release announcing its bid for PeopleSoft, Oracle management hedged on whether the company would back the J.D. Edwards deal. “Once Oracle’s acquisition of PeopleSoft is complete, it will review whether, and on what terms, Oracle would support that transaction,” noted company management.
Credit Suisse First Boston has provided bridge financing and is advising Oracle on the transaction. Some market watchers believe PeopleSoft management will hold out for a higher offer from Oracle. But they also believe the deal would benefit PeopleSoft, since executives at Oracle and PeopleSoft both view SAP as their main rival.
