Oracle launches cash tender offer for PeopleSoft

Oracle will commence a cash tender offer to purchase all of the outstanding shares of PeopleSoft for approximately $5.1 billion on Monday.

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By  Matthew Southwell Published  June 7, 2003

Oracle will commence a cash tender offer to purchase all of the outstanding shares of PeopleSoft for US$16 per share, or approximately $5.1 billion, on Monday 9th June. The move comes just days after PeopleSoft unveiled plans to acquire JD Edwards for approximately US$1.7 billion and Invensys announced that it was selling Baan. Should all three deals be completed, the tier one enterprise software market will have shrunk from five main players to just two in under a week.

Oracle’s motivation for purchasing PeopleSoft is, officially, to make itself more profitable. As Larry Ellison, the company’s chairman and CEO says, “The acquisition of PeopleSoft will immediately make Oracle an even more profitable and competitive company.”

However the move can also be seen as a defence one, designed to combat the combined force of PeopleSoft and JD Edwards in the ERP market. Such views is borne out Oracle’s announcement that it will review the merger agreement between JD Edwards and PeopleSoft, and decide whether or not to support it, once its acquisition of PeopleSoft is complete.

Further evidience comes from Oracle’s decision not to sell PeopleSoft’s products, should the cash tender be accepted. Instead, Oracle will integrate some of PeopleSoft’s products into its own solution set instead

“Although we will not be actively selling PeopleSoft products to new customers, we will provide enhanced support for all PeopleSoft products. Furthermore, we will be incorporating the advanced features from the PeopleSoft products into future versions of the Oracle eBusiness Suite,” confirms Ellison.

Although the cash tender will not be launched until Monday, Ellison has already submitted a letter to PeopleSoft’s board of directors expressing a desire to discuss the offer with them. The tender offer will be subject to customary conditions, including expiration of the applicable Hart-Scott-Rodino waiting period, a majority of PeopleSoft’s shares on a fully diluted basis being tendered and not withdrawn, and the redemption or amendment of PeopleSoft’s shareholder rights plan.

“Given PeopleSoft’s current prospects and plans, we believe our offer presents compelling value to PeopleSoft shareholders. In addition, we expect that the acquisition of PeopleSoft will increase Oracle’s earnings per share from the first combined quarter. We expect there to be substantial cost savings and minimal business integration risk,” comments Jeff Henley, Oracle executive vice President & CFO.

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