The announcement was a major victory for Oracle chief executive Larry Ellison, who doggedly pursued PeopleSoft over 18 months despite a series of financial, regulatory and legal obstacles that were put in his path.
The takeover battle, rare for Silicon Valley, cost PeopleSoft chief executive Craig Conway his job and raised concerns about Oracle dominating the market for heavy-duty business and database software.
"This has been a long, emotional struggle, and our employees have consistently performed well under the most challenging of circumstances," said A. George "Skip" Battle, chairman of PeopleSoft's transaction committee, in a statement.
Under the deal, Oracle will pay $10.3 billion in cash, or $26.50 for every share of Pleasanton, Calif.-based PeopleSoft. The offer, which has been approved by the boards of both companies, is about 10% higher than Oracle's previous offer and well above the initial bid of $16 a share.
"This merger works because we will have more customers, which increases our ability to invest more in applications development and support," said Ellison in a statement.
Investors welcomed the end of the corporate feud, sending shares of Oracle up $1.18 a share, or nearly 9%, to $14.46 on the Nasdaq. PeopleSoft shares rose $2.48, or more than 10%, to $26.43 on the Nasdaq.
Redwood Shores, Calif.-based Oracle, which primarily sells databases for storing corporate data, wants to add PeopleSoft's programs for managing payroll and other tasks to compete better with SAP, IBM and Microsoft.
In October, Oracle said investors holding about 60% of PeopleSoft's stock had tendered their shares for its previous offer.
Until today's agreement was reached, both companies were bracing themselves for a proxy fight in which Oracle would seek to win control of PeopleSoft's board at its annual meeting in March.
The combination will most likely result in heavy job losses. Oracle has said that it plans to eliminate as many as 6,000 jobs, more than half of those now on PeopleSoft's payroll.
Times staff writer Joseph Menn contributed to this story.