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PeopleSoft finally relents, accepts Oracle offer
Shares in both companies up sharply after drawn-out hostile takeover battle ends. Business software maker's holdout added $10 a share.
By Reuters
Business software maker PeopleSoft has accepted a sweetened $10.3 billion acquisition offer from rival Oracle, ending a bitter, 18-month hostile takeover battle, the companies said on Monday.
Oracle (ORCL, news, msgs)'s bid of $26.50 per share was approved by the boards of directors of both companies. Oracle had said its previous bid of $24 a share was its best and final offer.
Oracle argued that it needed to acquire PeopleSoft to better compete with market leader SAP of Germany and Microsoft (MSFT, news, msgs).
PeopleSoft shares jumped 10% to $26.38 in pre-market trade on the Inet electronic brokerage system, to their highest level in 19 months and continued to rise sharply after the bell. Oracle shares rose 7% to $14.19, a 10-month high.
Blueprint for software industry consolidation
Eugene Walton of Walton Holdings, an independent technology stock research firm, said the deal was a sign of the factors driving consolidation in the software industry.
"I guess what it does is tells everyone else in the software business that it truly is a no-growth business,'' Walton said. "Now Oracle has given us the game plan on how to consolidate. If they can get PeopleSoft this way, then anything goes. No software company can protect themselves from not being acquired.''
The deal, which is expected to close by early January, was announced on the same day that Oracle and PeopleSoft were scheduled to appear in Delaware Chancery Court for a hearing on Oracle's lawsuit to void PeopleSoft's shareholder rights' plan, which had been the last barrier to a hostile takeover.
Triggering the shareholder rights' plan, or poison pill, would have made a deal prohibitively expensive for Oracle.
Bitter, protracted and over
Oracle, based in Redwood Shores, Calif., and headed by Chief Executive Larry Ellison, launched its offer for PeopleSoft with a bid of $16 a share, or about $5.1 billion, in June 2003. At that time, shares of PeopleSoft, based in Pleasanton, Calif., were trading at $15.11.
Oracle's offer price for PeopleSoft had see-sawed up and down in the months following its original bid, in a period that saw PeopleSoft close its own acquisition of J.D. Edwards.
The deal is the largest acquisition by far for Oracle, which has preferred to build rather than buy.
"This merger works because we will have more customers, which increases our ability to invest more in applications development and support,'' Ellison said in a statement.
The protracted battle between the had been marked by bitter accusations, including a threat by PeopleSoft CEO Dave Duffield to sue Ellison for defamation over information released by Oracle about Duffield's stock sales.
Duffield, founder and chairman of PeopleSoft, took the additional post of CEO after the company's board ousted President and CEO Craig Conway, citing a lack of confidence.
A week after his ouster, Conway testified in Delaware court that he had lied to Wall Street analysts a year earlier about the impact of Oracle's hostile bid on PeopleSoft's business.
Ellison, in a conference call on Monday, said he expects to see "good-sized reductions'' in sales and marketing costs following the merger. He made no comments on possible job cuts but said he hopes to "retain the best PeopleSoft salespeople.'' He also said research and development spending by the combined company would be cut by $150 million to $200 million.
Oracle, which reported better-than-expected fiscal second-quarter earnings just moments before announcing the PeopleSoft deal, said the acquisition would add about 1 cent per share to its fiscal fourth-quarter results, excluding certain items, about 2 cents per share in each quarter in fiscal 2006, and "a bit more'' in fiscal 2007.
Ellison said further large mergers are unlikely in the near term.
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