PeopleSoft accelerates JD Edwards acquisition: Oracle fights back

News just in: PeopleSoft has now rejected the latest raised hostile offer from Oracle to the buy the company. In a press release, Peoplesoft says: “The board concluded that the proposed combination of PeopleSoft and Oracle faces substantial regulatory delays and a significant likelihood that the transaction would be prohibited. Those delays and uncertainties, combined with Oracle’s stated intentions to discontinue PeopleSoft’s products, would subject PeopleSoft’s business to irreparable damage.” The last week has seen further twists in the Oracle, PeopleSoft and JD Edwards acquisition and counter acquisition tale. Yesterday, PeopleSoft accelerated its bid to get JD Edwards with a revised mixed cash/shares scheme. The firm started an exchange offer for JDE shareholders, offering them the choice of cash or PeopleSoft stock worth $7.05 plus 0.43 of the PeopleSoft stock price. Based on the $16.92 per share closing price on June 13, that works out to $14.33 per share, making the total transaction value around $1.75 billion. PeopleSoft also revised its estimate of cost savings from the merger way up, from $80 million to between $150 and 200 million, to further sweeten the anti-Oracle counter measure. The cost of that will inevitably be much faster and more sweeping rationalisation – presumably of people, offices and products. But Oracle also upped the ante, with a 22% higher bid for its quarry, raising its offer from $16 to $19.5 per share in response to PeopleSoft’s climbing stock and tactics, and taking that proposed acquisition value up to $6.2bn. At the time PeopleSoft’s board advised shareholder “to take no action at this time”. Now we have the expected board recommendation of rejection we have to wait and see what the market, and the big institutional investors, want to do. PeopleSoft’s board – which would be getting its marching orders if the Oracle acquisition goes ahead – says it believes Oracle’s hostile bid “was designed to disrupt the company’s strong momentum at significant cost to PeopleSoft’s customers”. That claim is vigorously denied by Oracle, which makes the point that it wants to gain the customer base, and ‘upgrade’ them to PeopleSoft users to Oracle 11i in due course. However this plays out, the big league software vendor world will be markedly changed. It’s no longer safe to assume that simply because you’re buying software from a very large established corporation you are immune to serious change. Already, SAP has been taking full page advertising in the FT, encouraging existing and would-be PeopleSoft users to come and talk to it. IFS has issued a press release announcing what it terms a ‘Rescue Program’ for JD Edwards customers particularly in the US to ‘upgrade’ to IFS Applications, “without paying up-front license fees”. Participating companies will also get support and maintenance at $1,000 per year per user if they sign a three-year agreement. And QAD founder and CEO Pam Lopker told this journal: “The JD Edwards situation has opened up the market for us. JDE has in effect publicly announced that it can’t make it on its own. But if they’re bought by PeopleSoft they will rationalise people and products. So JDE users might get PeopleSoft financials and tools. It won’t be the same product as today.” That is strong language and, at least in part, contestable. However, one thing’s for sure: the manufacturing IT world is big, but not big enough to sustain the current numbers of big and mid size players. We can all expect consolidation – ugly or not – to continue and IT suppliers’ faces and products to be subject to more change over time.