PeopleSoft Sweetens J.D. Edwards Offer
Monday June 16, 6:03 pm ET
By Lisa Baertlein
PALO ALTO, Calif. (Reuters) - PeopleSoft Inc.(NasdaqNM:PSFT - News) on Monday offered to pay $1.75 billion in cash and stock for J.D. Edwards & Co.(NasdaqNM:JDEC - News), eliminating the need for shareholders at either company to vote on the friendly offer.
PeopleSoft's simplified offer means the business software maker does not have to issue new shares to buy J.D. Edwards, a step that would have required shareholder votes at both companies. It also will allow the deal to be completed before Oracle Corp.(NasdaqNM:ORCL - News) can convince PeopleSoft shareholders to accept its $5.1 billion all-cash hostile takeover.
Oracle, the world's No. 2 independent software maker, said its offer for PeopleSoft remained in place. It criticized PeopleSoft's new strategy in a statement as "simply an attempt to take away the shareholders' vote ... This move does not deter Oracle and our offer remains before shareholders."
Analysts said they now expect Oracle to raise its $16-per share offer for PeopleSoft -- a bid that has been under water since shortly after it was announced on June 6.
PeopleSoft's board rejected Oracle's bid last week as a low-ball offer that could be blocked by antitrust regulators and was aimed at sowing confusion among its customers.
By contrast, PeopleSoft said its merger with J.D. Edwards would boost its earnings and produce cost savings of $150 million to $200 million at the combined company.
At stake in the battle is the second-place spot in the rapidly consolidating business-automation software market dominated by Germany's SAP AG. (XETRA:SAPG.DE - News; NYSE:SAP - News)
Oracle now holds that coveted No. 2 position, but would be unseated by the tie-up between PeopleSoft and J.D. Edwards.
PeopleSoft shares finished down 17 cents at $16.75 on the Nasdaq. J.D. Edwards' stock was up 73 cents, or nearly 6 percent, at $13.77, and Oracle shares also gained, closing 17 cents higher at $13.65.
MOUNTING BATTLE
Under its new offer, PeopleSoft said it would pay $863 million in cash for J.D. Edwards. It would also issue 52.6 million new shares, but that number falls under the threshold that would require a shareholder vote. The new offer amounts to $7.05 in cash and 0.43 of a share of PeopleSoft for each J.D. Edwards share held.
The new terms allow PeopleSoft to begin tendering for J.D. Edwards shares sooner than under it had expected to under the original offer, announced on June 2. Then, PeopleSoft proposed an all-stock deal that could have taken up to four months to close.
PeopleSoft said it would finance the cash portion of the deal by tapping its $2 billion in cash and investments.
"By getting the shares tendered, PeopleSoft is suddenly half pregnant," said Paul Crisci, a managing director in the West Coast mergers and acquisitions office of Broadview International.
"Now, it's Oracle's move," said Sanford C. Bernstein analyst Charles Di Bona, who added that Wall Street and Oracle had "completely expected" PeopleSoft's latest move.
"I think there are a lot more chapters of this game that could potentially play out. I would never rule Oracle out," said Heather O'Loughlin, a technology analyst at State Street Global Advisors, a Boston-based firm that is a major shareholder each of the three companies.
MARSHALING TROOPS
Oracle and PeopleSoft on Monday launched advertising campaigns, with fights looming for shareholders and in court.
PeopleSoft sued on Friday, alleging Oracle was engaging in unfair trade practices with the intent of harming its sales, poaching its customers and driving down its share price. J.D. Edwards has also sued Oracle.
Oracle has said the lawsuits are without merit.
PeopleSoft has hired investment bankers Citigroup Global Markets(AMEX:SSB - News) and Goldman Sachs(NYSE:GS - News) to advise on the Oracle matter. On the proxy solicitation front, the software maker has hired Georgeson Shareholders Communications.
PeopleSoft's public relations firm is Joele Frank, Wilkinson Brimmer Katcher. The firm represented Walter Hewlett in his attempt to block Hewlett-Packard Co.'s (NYSE:HPQ - News) acquisition of Compaq Computer Corp.
Credit Suisse First Boston is handling Oracle's takeover bid and will provide financing. The software maker also has retained MacKenzie Partners, a New York-based proxy solicitation firm that helped Computer Associates International Inc.(NYSE:CA - News) fend off a dissident investor's bid for control of the software company. (Additional reporting by Arindam Nag and Caroline Humer in New York) |
