In Bid to Block Oracle, PeopleSoft Adds Cash to J.D. Edwards Acquisition Offer
Software maker PeopleSoft Inc. sweetened the terms of its friendly offer for J.D. Edwards & Co. on Monday with $863 million in cash in an attempt to ward off a $5.1-billion hostile takeover bid from database giant Oracle Corp.
PeopleSoft and Oracle are battling for the allegiance of PeopleSoft shareholders. Oracle is hoping to woo them with a tender offer of $16 per share. PeopleSoft is trying to convince them that their shares are worth more -- especially if PeopleSoft completes its $1.75-billion acquisition of J.D. Edwards and unseats Oracle as the No. 2 maker of business applications software.
With the cash, “PeopleSoft just made their option more appealing to their shareholders,” said David Hilal, an analyst with Friedman, Billings, Ramsey & Co., an investment bank in Arlington, Va.
The original proposal was to leave current PeopleSoft shareholders with 75% of the combined company. Under the amended pitch, they would retain 85.7%. J.D. Edwards shareholders, meanwhile, would be able to pocket some cash in addition to PeopleSoft stock.
The new terms are designed to reduce Oracle’s chances of owning PeopleSoft.
For starters, by including cash in its bid for J.D. Edwards, PeopleSoft eliminated the need for a vote by shareholders, moving the merger date up by several weeks at the least. And, if the merger is completed, PeopleSoft’s $1.9-billion cash hoard would drop by $863 million, making it less attractive to Oracle.
If the plan works, PeopleSoft also will increase the likelihood that antitrust regulators would seek to block a combination of Oracle and a merged PeopleSoft and J.D. Edwards.
“If there are any antitrust issues, the odds of that becoming a problem is more likely if the market has just three competitors than if the market has four,” Hilal said.
All three companies compete in the market for software used by big organizations to manage such things as payroll, customer lists and inventory.
Oracle Chief Executive Larry Ellison pledged to discontinue PeopleSoft’s products if he buys the company. That, PeopleSoft CEO Craig Conway told Bloomberg News on Monday, is “like me asking if I could buy your dog so I can go out back and shoot it.”
Conway and others have theorized that Ellison’s motive is to disrupt PeopleSoft’s business by injecting uncertainty into the minds of its customers.
Ellison said Monday that he was serious about buying PeopleSoft and scoffed at his quarry’s latest move.
“PeopleSoft is doing everything it can to prevent its shareholders from voting,” he said.
Shares of PeopleSoft fell 17 cents to $16.75 on Monday, while J.D. Edwards gained 73 cents to $13.77 and Oracle rose 17 cents to $13.65, all on Nasdaq.
