PeopleSoft’s JD Edwards acquisition now back on: but the fighting's not over

PeopleSoft has been cleared to acquire JD Edwards in the US, and yesterday expected to complete its accelerated completion as early as midnight Eastern Standard Time last night. Earlier in the week, the two companies received an early termination of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 from the US Department of Justice. PeopleSoft president and CEO Craig Conway greeted the news with understandable pleasure. “The DOJ’s decision to grant early termination is great news,” he said. “This is a very important milestone and clears the way for the JD Edwards acquisition.” But for those who might conclude the big league acquisition tussle –Oracle’s simultaneous hostile bid for PeopleSoft but not initially JD Edwards – is over, it’s not. Oracle seems just as determined to press on with its acquisition plans for PeopleSoft post merger as it was before. “We believe time is on our side. Oracle remains committed to acquiring PeopleSoft – even with the addition of JD Edwards,” said Oracle spokesman Jim Finn. That’s based on the amended offer of $19.5 per share on June 18, valuing PeopleSoft at $6.3 billion. And Oracle believes that’s a good figure – good for shareholders and users alike. On the user side, Oracle executive vice president Chuck Phillips has been at pains to talk up the positives. He’s suggesting that $6 billion and engineers around the world have been set aside for the current PeopleSoft products – also committing to an astonishing more than 10 years now for support and to maintaining development of PeopleSoft 9. He’s also saying that, contrary to original reports, PeopleSoft users will not be forced to migrate to the Oracle platform. Phillips makes the point that the big cost for enterprise software vendors today is getting customers. Oracle wants more users for maintenance and support revenue so that it’s less dependent on getting (expensive) new users. There’s some work to be done for this to come to fruition. So far, Oracle’s offer has resulted in just 11% of PeopleSoft’s shares being tendered. Either way, for now, JD Edwards stock holders will get $14.7384 in cash or 0.8243 of a PeopleSoft share for each of their shares, making the deal worth $1.8 billion. And PeoleSoft itself has turned in surprisingly good results for its quarter ended June 2003 in the face of an expected shortfall (in part due to the hostilities and the resulting uncertainty). PeopleSoft made great play of its results, with Conway declaring: “Against all odds and odds makers, under the most challenging conditions a company can face, PeopleSoft not only met but significantly exceeded our original financial guidance.” Similarly, he was unequivocal in his condemnation of the Oracle bid and the shareholders’ action, referring to “the ‘underwhelming’ response to Oracle’s tender offer,” and the “extraordinary risks” and damage to the company likely from the delays and Oracle’s plans for the PeopleSoft products. In an open letter to its shareholders, the PeopleSoft board said: “Oracle’s statements regarding its plans for PeopleSoft’s products create serious uncertainty as to the level of support and enhancements that PeopleSoft customers could expect. Customers will not commit millions of dollars to enterprise software that is subject to such uncertainties. Employees will not remain with a company when its business vitality and their future are in doubt. If we had recommended that the offer be accepted, and the transaction was not completed, the damage to stockholder value could be enormous.” So, after what has been a very public and high level fight, joined also by others in the software vendor community sensing metaphorical blood and potential for commercial advantage, JD Edwards will now find its new home in PeopleSoft. For the company that means a much bigger foothold in mid to large scale manufacturing than is currently the case. JDE’s chairman and CEO Bob Dutkowsky said: “With PeopleSoft’s strength in the large enterprise space and services industries, combined with JD Edwards’ position as an acknowledged leader in the mid-market and manufacturing, we will be able to serve the entire enterprise software market.” For users it means a very advanced suite of web architected systems and about as much strength and stability in today’s uncertain climate for many software vendors as you’re going to get. This one looks set to run for some time to come.