PeopleSoft, J.D. Edwards Try to Speed Merger

PeopleSoft and
J.D. Edwards
Monday have amended their merger agreement to speed up the deal
in the wake of Oracle’s $5.1 billion hostile takeover bid of PeopleSoft.


The boards of both companies, who believe the new deal will allay customers’
fears after Oracle’s offer, unanimously approved the amendment as
Oracle takes to the road to convince shareholders that its offer of $16 a share for PeopleSoft is the better deal.


Oracle’s bid has sent the market for enterprise applications, in which all parties compete, into a state of uncertainty while the three-way struggle plays out.


Based upon the closing price of Pleasanton, Calif.’s PeopleSoft common stock
of $16.92 per share on June 13, the consideration for each outstanding share
of J.D. Edwards common stock would be $14.33, for a transaction value
of some $1.75 billion. The consideration will be paid in $863 million in cash and 52.6 million new PeopleSoft shares.


J.D. Edwards stockholders have their choice to receive $7.05 cash, plus 0.43 of a PeopleSoft common share for each share of common stock they own, a fraction of a PeopleSoft common share, or a combination of cash and a fraction of a PeopleSoft common
share.


Monday’s deal is roughly $500,000 sweeter for shareholders than the original plan,
which was an all-stock deal. In that deal,
worth about $1.7 billion, PeopleSoft offered stockholders 0.860 PeopleSoft
common shares for each outstanding J.D. Edwards common share, based on the
closing price of PeopleSoft stock on May 30 and J.D. Edwards’ shares
outstanding.


“This combination of J.D. Edwards and PeopleSoft is a perfect match of two
extraordinary and highly complementary companies and is the product of
careful, reasoned study,” said J.D. Edwards Chairman, President and CEO Bob
Dutkowsky. “The amended definitive agreement allows the companies to capture
near-term financial synergies and deliver long-term stockholder value.”


PeopleSoft, which said the new deal would provide annual synergies in the
range of $150 million to $200 million, expects to commence the exchange
offer soon. If completed, any remaining J.D. Edwards shares would be acquired
in a second-step merger, the companies said, and J.D. Edwards stockholders would own 14.3 percent of the combined company.


“Here they go again,” said Jim Finn, an Oracle spokesperson, in a statement. He called the latest merger amendment between J.D. Edwards and PeopleSoft an attempt to take away the shareholders’ vote.

“If you consider that PeopleSoft and J.D. Edwards put together the best financing approach when they announced their original merger, this sub-optimal approach can only be a ploy to preserve management’s self-interest. This move does not deter Oracle and our offer remains before shareholders.”


Deutsche Bank Securities said the news was good for J.D. Edwards shareholders, because it “increases the likelihood” that the deal will go through. The firm said it expects a reaction from Oracle.


Monday’s announcement is the latest serve and volley between PeopleSoft and
Denver’s J.D. Edwards and their nemesis Oracle. Last week, first J.D.
Edwards
and then PeopleSoft sued
Oracle
for, among other things, tortious interference, after it
aggressively bid to acquire PeopleSoft only five days after PeopleSoft
offered to merge with J.D. Edwards.


Throughout, Redwood Shores, Calif.’s Oracle has been dismissive of the
lawsuits, some of which are aimed personally at Oracle CEO Larry Ellison,
and has vowed to continue its pursuit of PeopleSoft.


“PeopleSoft seems to have revived its on-again, off-again litigation
strategy,” said Oracle’s Finn Friday. “This matter must be decided
by PeopleSoft shareholders and not by frivolous litigation. As for
PeopleSoft’s cryptic reference to its secret ‘discussions’ with J.D.
Edwards, any action by the PeopleSoft board to take the vote away from
PeopleSoft shareholders and to further entrench themselves would only
compound their abuse of fiduciary duty.”


What no one disputes is that the fierce fighting has shaken the industry to
the core, with market leader SAP perhaps
sitting pretty as the lone benefactor. Analysts have said that even if
Oracle fails in its quest, it will have seriously disrupted PeopleSoft’s
sales cycle. Deutsche Bank Securities said it expects PeopleSoft’s sales
quarters for the last three weeks of June to be disrupted because of the
lingering issues.


“We believe that new deal flow has come to a virtual halt and that customers
are postponing plans to continue existing implementations until questions
about PSFT’s long-term stability/viability become more clear,” the research
firm said last week.


The amended transaction is expected to close in the third calendar quarter
of 2003.

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