Oracle signs deal to buy PeopleSoft for $10.3 billion

The deal that dragged longer than any holiday dinner seems — finally — to be over, as Oracle Corp. announced its acquisition of PeopleSoft Inc. early Monday morning during its Q2 2005 earnings conference call.

“Late yesterday evening (Sunday Dec. 12), Oracle and PeopleSoft entered into a definite merger agreement,” said Larry Ellison, Oracle’s CEO. In fact, the deal was signed even as both party’s lawyers circled, ready to proceed Monday with litigation against each other in a Delaware courtroom over the very merger in question.

“Over the weekend, however, Oracle was approached by a representative of PeopleSoft,” Ellison said.

PeopleSoft’s board was interested in resolving the litigious nature of their relationship, Ellison said, and the two companies were ultimately able to sign the deal late Sunday night. Part of the deal included both parties dropping their respective lawsuits. At $26.50 per share (all figures U.S.), up 11 per cent from Friday’s 23.95 close, the deal will cost Oracle $10.3 billion. This is $1.1 billion more than Oracle said was its final offer of 9.2 billion or $24 per share.

The customers Oracle gains from PeopleSoft will allow it to invest more in applications development and support, Oracle said in a separate statement, repeating an argument the company has been making for the last 18 months as it fought to win support from PeopleSoft’s shareholders, executives and customers.

Oracle plans to enhance PeopleSoft 8 and develop a PeopleSoft 9, and enhance JD Edwards’ 5 and develop a JD Edwards 6, Oracle said in the statement, referring to software products it will acquire through the merger. Additionally, Oracle will develop a suite with the features necessary for an “easy migration from whatever product you are currently using.”

Regardless of Ellison’s claims, one Canadian analyst said it is in a customer’s best interest to pay close attention to all of the announcements coming from Oracle. “I think that…any CIO or business leader who has made a commitment to PeopleSoft or JD Edwards applications, one thing they want to understand is…what does this mean for me?” said Stephen Graham, group vice-president software business strategies with IDC Canada Ltd. in Toronto. “Any end user wants to make sure they understand clearly what the roadmap is going to be.”

If Oracle wants PeopleSoft customers upgrade or migrate, the company has to be very clear in its intentions. “Uncertainly will definitely delay an upgrade…(so) it behoves Oracle to get that roadmap in the hands of customers as soon as possible,” he said.

At Oracle’s OpenWorld conference last week (before the merger was a done deal), Patricia Dues, project officer at the City of Las Vegas and president of the Oracle Applications Users Group (OAUG), said the deal would be a win-win.

“We see it as a positive. A large number of our Oracle applications users also own PeopleSoft,” she said. Also, “we’re here as OAUG to help them with the user group model. The way they operate today may change, so if they want to meet with us, we’re here to discuss how we set our user group up, to help them get theirs in line.”

The companies had been scheduled to meet later Monday in Delaware Chancery Court to give depositions over PeopleSoft’s “poison pill” provision, aimed at blocking a hostile takeover attempt. The poison pill allows PeopleSoft to significantly inflate its number of outstanding shares in case of a takeover bid, making a buyout prohibitively expensive.

The companies now plan to put their litigation on hold and drop the claims entirely when the merger is complete, PeopleSoft said in its statement.