Oracle turns tables on PeopleSoft with takeover bid

Oracle sent PeopleSoft’s plan to acquire J.D. Edwards into a tailspin Friday by making a surprise US$5.1 billion hostile takeover

bid for PeopleSoft that could have major implications for Canadian enterprises.

On Monday, PeopleSoft said it would pay US$1.7 billion to merge with J.D. Edwards in an attempt to move its human resource and financial applications into J.D. Edward’s installed base of mid-market customers. Oracle said its US$16 per share offer to acquire PeopleSoft would not necessarily cancel that transaction, but it would put it under review.

Oracle said if its cash tender offer is approved, it would split PeopleSoft’s development team into two groups. One group would continue to keep PeopleSoft’s products current, while the other would create scripts to migrate PeopleSoft users to Oracle’s E-Business suite of applications. The product lines of the two companies would not be integrated under Ellison’s plan, nor would PeopleSoft’s products be sold to new users. Ellison maintained, however, that it would extend a year-end deadline that could have forced some PeopleSoft users to move to version 8 of the product and would not impose any extra licensing charges to move to Oracle products.

“”Most PeopleSoft customers are running on the Oracle database, so immediately we can offer one-stop support,”” he said.

In a public statement late Friday PeopleSoft chief executive Craig Conway called Oracle’s offer “”atrociously bad behavior”” but admitted it was required by law to review it and make a recommendation to shareholders.

At least one Canadian PeopleSoft user said the proposed takeover leaves his plans in a state of flux. Ken Hill, director of financial services for the Region of York, Ont., said his team was in the middle of a “”fit gap”” analysis that would determine whether PeopleSoft 8.4 would be rolled out across the organization. A decision to go ahead with the project, which would have begun immediately, was to be made next week, he said.

“”If what you’re telling me is true, we may have to take that into consideration and postpone that decision until this becomes clearer,”” he said.

IDC Canada software analyst Warren Shiau said an Oracle takeover would put the brakes on PeopleSoft’s plan to integrate with J.D. Edwards and would be considered a de facto hostile bid.

“”PeopleSoft customers are very loyal,”” he said. “”I imagine this is a first little stage set in a larger strategy. What Oracle is saying here would be very hard. I think it’s just more like a position statement or establishing a first bargaining position rather than what they would think of actually implementing.””

Ellison said Conway approached him a year ago to merge Oracle’s applications business with PeopleSoft’s and create a new company, but the two could not agree on an organizational structure. He said his proposal would not disrupt Oracle customers or employees because the two organizations would not be integrated, and argued that the projected cost savings of the J.D. Edwards merger would be small.

“”As far as the technology’s future, PeopleSoft customers will have 5,000 to 6,000 developers work on their next generation of products. That’s simply something they wouldn’t have had on this other road,”” Ellison said.

Oracle said it would formally make its tender offer on Monday. It is financing the acquisition with available cash and bridge financing from Credit Suisse First Boston.

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