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PeopleSoft Sweetens J.D. Edwards Offer

Posted on: Tuesday, 17 June 2003, 06:00 CDT

By RACHEL KONRAD

SAN FRANCISCO (AP) -- Trying to fend off a hostile takeover bid by rival Oracle Corp., business software maker PeopleSoft Inc. on Monday added cash and an accelerated timetable to its offer to acquire J.D. Edwards & Co.

PeopleSoft and Oracle both launched major publicity campaigns Monday, with the companies placing full-page ads in major newspapers in the United States, Canada, Mexico and in other countries home to corporate clients.

Executives from PeopleSoft and Oracle planned to spend the week trying to persuade institutional investors and large customers to either back the proposed acquisition or support the hostile takeover bid. PeopleSoft shareholders are scheduled to vote on the Oracle bid as early as July 7.

Under terms announced Monday, the J.D. Edwards deal would be valued at $1.75 billion, including $863 million in cash and 52.6 million newly issued PeopleSoft shares. When announced June 2, it was entirely a stock swap initially valued at $1.7 billion.

PeopleSoft also said it expects the acquisition to close in the third calendar quarter of 2003. Previously, the company expected the deal to close in the third or fourth quarter.

Wall Street interpreted the new terms as a persuasive overture by PeopleSoft - a way to calm jittery corporate customers and show shareholders that the company intends to acquire J.D. Edwards and remain a major player in business software.

Four days after the PeopleSoft and J.D. Edwards deal was announced, Oracle mounted a $5.1 billion hostile takeover bid for PeopleSoft. Oracle offered to buy PeopleSoft for $16 per share, and it threatened to replace PeopleSoft with Oracle software if shareholders approve the hostile bid.

"They're sweetening the merger agreement," analyst Jason Kraft of A.G. Edwards & Sons Inc. said of the new terms. "It's basically a defensive stance against Oracle to make the merger more compelling. But the deal's still going to be a great challenge."

The new terms are the latest salvo in an increasingly ugly battle in the business software niche, which builds computer programs that maintain giant databases so companies can crunch statistics about customers' online shopping habits, securely store credit card numbers, or compile mailing lists with millions of addresses. Oracle and PeopleSoft both compete fiercely against the largest player in the niche, Germany's SAP AG. (SAP)

Denver-based J.D. Edwards filed a lawsuit Thursday against Oracle, seeking $1.7 billion, plus unspecified punitive damages, for trying to interfere with its PeopleSoft deal. The suit also names Oracle Chairman Larry Ellison and Chuck Phillips, a former software securities analyst Oracle recently hired. Oracle said the suit is meritless.

PeopleSoft also placed full-page ads in 12 newspapers around the world on Monday, including USA Today, The New York Times, The Wall Street Journal and Financial Times. The ads, signed by CEO Craig A. Conway, urged customers to "show your support for PeopleSoft by moving ahead with your planned purchases of PeopleSoft products."

"Minimizing customer uncertainty - this is critical," PeopleSoft spokesman Steve Swasey said Monday. "There have been a lot of threatening statements made about the future of PeopleSoft software. We have 5,100 customers around the world that rely on PeopleSoft software every day, we want to emphasize that PeopleSoft is a strong, viable company."

Oracle stood by its all-cash offer Monday, and the Redwood Shores-based company mounted its own attack. Full-page ads in the San Jose Mercury News and elsewhere emphasized in large type that Oracle's offer was all cash, and Oracle could deliver better customer service and flexible upgrades for PeopleSoft's clients.

"If you consider that PeopleSoft and J.D. Edwards put together the best financing approach when they announced their original merger, this sub-optimal approach can only be a ploy to preserve management's self-interest," said Jim Finn, an Oracle spokesman. "This move does not deter Oracle, and our offer remains before shareholders."

Shares of PeopleSoft dropped 17 cents and closed Monday on the Nasdaq Stock Market at $16.75. Shares of J.D. Edwards rose 73 cents, to $13.77. Shares of Oracle rose 17 cents to $13.65.

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