PeopleSoft Inc. announced on Monday 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’ board 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.
According to a statement released by the software companies, under the terms of the agreement, stockholders will receive 0.860 PeopleSoft common shares for each outstanding J.D. Edwards common share for the deal which is set to close in the third or fourth calendar quarter of 2003.
The acquisition will mean that 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 such as 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 goal.
“One of PeopleSoft’s focuses in Canada for future growth is to expand in the mid-market, so what’s necessary for them to do this is to hire in 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,” Shiau said.
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 they’ve 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.”
On top of a mid-market presence and additional products, Caldwell said that once the acquisition is complete, PeopleSoft hopes to take Oracle’s “number two” position after SAP in the enterprise application software industry.
Toronto-based AGF Funds Inc., a Canadian funds and investment company, has been a PeopleSoft customer since September 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 and PeopleSoft could possibly improve its abilities to deal with the mid-market companies like ourselves,” Elioff said.
In addition to having advantages for both companies, Shiau said the acquisition will also benefit IBM Corp., a company that both organizations hold strong ties with.”So, on technical initiatives like porting the product lines over to Linux, instead of IBM working with two companies separately, now it only needs to co-ordinate one effort with the combined PeopleSoft-J.D. Edwards entity,” Shiau said.
The acquisition is subject to regulatory review, approval by the respective companies’ stockholders and other customary conditions.
Caldwell said J.D. Edwards will continue to operate out of Denver.