PeopleSoft Inc. recently announced plans to acquire Denver-based J.D. Edwards & Company in a transaction valued at approximately US$1.7 billion.
In a unanimous decision by both companies’ boards of directors, J.D. Edwards will become a wholly owned subsidiary of PeopleSoft. PeopleSoft stockholders will own 75 per cent of the company, while J.D. Edwards stockholders will own the remaining 25 per cent.
Under the terms of the agreement, stockholders will receive 0.860 PeopleSoft common shares for each outstanding J.D. Edwards common share, according to a statement released by the software companies. The deal is set to close in Q3 or Q4 2003.
The acquisition means the combined companies will share 13,000 employees, more than 11,000 customers in 150 countries and US$2.8 billion in annual revenues.
According to Pleasanton, Calif.-based PeopleSoft, this acquisition will enable it to expand its presence in more than 20 industries with services ranging from manufacturing and distribution to asset-intensive industries.
Nanci Caldwell, executive vice-president and chief marketing officer at PeopleSoft, said the company’s focus has traditionally been on the service industry, including financial services, communications, health care, government and education. And with the acquisition, PeopleSoft plans to take full advantage of what J.D. Edwards can offer in the areas of manufacturing, distribution and asset-intensive industries like pulp and paper.
“It’s a really synergetic footprint there in terms of industry coverage,” Caldwell said.
Toronto-based IDC Canada Ltd. software analyst Warren Shiau said this acquisition is a positive move for PeopleSoft, which will now be able to realize a major future goal.
“One of PeopleSoft’s focuses in Canada for future growth is to expand in the mid market,” he said. To be successful PeopleSoft needs to hire “mid-market focused sales people, mid-market focused services people, and J.D. Edwards is a good fit for them because that’s what their core market has been.”
In addition to a mid-market presence and more products, Caldwell said once the acquisition is complete, PeopleSoft hopes to overtake Oracle’s number two spot (after SAP) in the enterprise application software industry.
Shiau added that the acquisition is beneficial to J.D. Edwards because it will help the company move up-market, a goal it has expressed for some time in areas where it has developed some industry expertise like construction and real estate.
“They want to try to move into larger accounts, but it’s difficult to do when you only have a mid-market focus sales organization,” Shiau said. “So, PeopleSoft’s sales organization is going to complement the J.D. Edwards product line.”
Toronto-based AGF Funds Inc., a Canadian funds and investment company, has been a PeopleSoft customer since September of 2002, when the company bought PeopleSoft’s CRM suite.
Steve Elioff, vice-president and CRM program director at AGF, said the acquisition, along with PeopleSoft’s desire to move into the mid-market, is good news for AGF.
“We are a mid-market company by capitalization so you would think there is an opportunity for synergy there,” he said. “[So] PeopleSoft could possibly improve its abilities to deal with the mid-market companies like ourselves.”
The one possible drawback to the acquisition for Elioff is if PeopleSoft, with all the focus on the new possibilities J.D. Edwards will bring, puts old customers and goals on the back burner.
“I guess one of the fears you always have is that there will be a great deal of time and resources devoted into ensuring the acquisition and merger occurs effectively, that you sometimes lose sight of the business around you,” Elioff said.
Shiau said that IBM Corp.