Oracle to Acquire PeopleSoft

Byline: Fred Barbash

Oracle Corp., the business software giant, announced a "definitive merger agreement" with smaller rival PeopleSoft this morning, bringing a probable end to one of the longest and nastiest hostile takeover struggles in recent corporate history.

Oracle, of Redwood Shores, Calif., said it will pay $26.50 per share, about $10.3 billion, for PeopleSoft. That is about $10 per share higher than Oracle's original offer 18 months ago and about $2 higher than what it had called its "best and final offer" in November.

More significantly, the board of PeopleSoft, which had been resisting the merger and had rejected five previous bids over the objections of a majority of its shareholders, approved this one. "We believe this revised offer provides good value" for PeopleSoft stockholders, said A. George "Skip" Battle, speaking for PeopleSoft.

"This has been a long, emotional struggle," Battle said in a statement.

Lawrence J. Ellison, founder and chairman of Oracle, said in a CNBC television interview this morning that PeopleSoft approached him during the past few days in an attempt to end the feud before it produced a prolonged court fight.

Ellison justified the elevated price, saying that he had learned that PeopleSoft was "more profitable than we thought." In addition, he said, "We thought there was real value in doing a friendly deal. . . . It did not end up in court. We did not do a proxy fight. We have a deal that's very good for Oracle shareholders."

He said the deal would double the number of Oracle customers, allowing it to compete more forcefully with German's global software power, SAP A.G.

"This is a major turning point for the entire enterprise software industry," Oracle co-president Charles Phillips said during a conference call with investors.

While the agreement could still fall apart, commentators today seemed convinced the fight was over.

Oracle, a database specialist, originally moved on PeopleSoft in an effort to improve its competitive position against SAP.

PeopleSoft, which specializes in personnel management software, resisted vigorously, claiming that Oracle was undervaluing it and its employees with a lowball offer mostly designed to prevent PeopleSoft from growing its own business by merging with J.D. Edwards, a third software firm.

The controversy, at one point or another, involved the Justice Department, which unsuccessfully objected to a merger; the European Union, which allowed it; an expensive court fight in Delaware; and months of turmoil and name-calling in the corporate suites of both firms.

It became highly personalized, with then PeopleSoft Chief Executive Craig Conway calling Ellison "sociopathic." He characterized Ellison's original offer as "atrociously bad behavior" and a "transparent" effort to interfere with PeopleSoft's takeover of J.D. Edwards.

Ellison, in turn, seemed to go out of his way to denigrate PeopleSoft, declaring at one point that he was only interested in PeopleSoft's customer list, rather than the company's products or employees.

"We will not be actively selling PeopleSoft's products to new customers," Ellison said when the fight began.

The prospects for an Oracle victory increased in November after PeopleSoft fired Conway, a former Oracle executive who led the campaign to defeat Oracle's bid, vowing never again to work for that company or Ellison.

Today Ellison declared in a statement that "this merger works because we will have more customers, which increases our ability to invest more in applications development and support."

Oracle hauled PeopleSoft to court in Delaware, challenging a "poison pill" provision in the company's bylaws that prevented the takeover even though it was favored by a majority of PeopleSoft shareholders. The companies said today that all litigation between them will terminate.

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