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Monday agreed to buy J.D. Edwards & Co. for $1.7 billion in stock, a move that shakes up the market for business applications software.The deal makes PeopleSoft the second-largest business software provider to Germany-based leader SAP as PeopleSoft will gain new access to mid-market application customers to add to its large market customer base. Combined, the companies will have about $2.8 billion in annual revenues, 13,000 employees and more than 11,000 customers in 150 countries.
PeopleSoft competes on different levels with SAP , Siebel and Microsoft to sell software for such segments as human resource management (HRM), customer relationship management (CRM) or enterprise resource planning (ERP) to large companies, meaning that the companies cater to small, medium and large classes of businesses, based on size. As a provider of software for large-scale firms, SAP effectively becomes PeopleSoft's greatest competitor. Microsoft tends to sell to the small- and mid-sized market, courtesy of its purchase of Great Plains Solutions two years ago. Siebel typically sell to the mid-sized market as well.Buying Denver's J.D. Edwards fills a gap in asset and manufacturing applications for Pleasanton, Calif.'s PeopleSoft, while Denver's J.D. Edwards hopes to benefit from selling PeopleSoft's popular human resources management software, said PeopleSoft President and CEO Craig Conway.
"The employees of both companies share a cultural passion for serving the customer," said J.D. Edwards Chairman, President and CEO Bob Dutkowsky. "Additionally, with PeopleSoft's strength in the large enterprise space and services industries, combined with J.D. Edwards' position as an acknowledged leader in the mid-market and manufacturing, we will be able to serve the entire enterprise software market in a way that no other vendor can. The integration of the two companies is a giant leap forward in fulfilling J.D. Edwards' goal to Make Customers Stronger."
J.D. Edwards will become a wholly owned subsidiary of PeopleSoft, and J.D. Edwards stockholders will own approximately 25 percent of the stock of the combined outfit.
As for terms of the deal, PeopleSoft is offering stockholders 0.860 PeopleSoft common shares for each outstanding J.D. Edwards common share. The value of the deal is based on the closing price of PeopleSoft stock on May 30, 2003 and J.D. Edwards' shares outstanding.
The transaction will be accretive to PeopleSoft's FY 2004 earnings on an adjusted basis excluding amortization associated with intangibles, the write-down of deferred revenue and other purchase accounting adjustments. The transaction is expected to close in the late third or early fourth calendar quarter.