PeopleSoft and J.D. Edwards Monday have amended their merger agreement to speed up the deal in the wake of Oracle's $5.1 billion hostile takeover bid of PeopleSoft.The boards of both companies, who believe the new deal will allay customers' fears after Oracle's offer, unanimously approved the amendment as Oracle takes to the road to convince shareholders that its offerof $16 a share for PeopleSoft is the better deal.
Oracle's bid has sent the market for enterprise applications, in which all parties compete, into a state of uncertainty while the three-way struggle plays out.
Based upon the closing price of Pleasanton, Calif.'s PeopleSoft common stock of $16.92 per share on June 13, the consideration for each outstanding share of J.D. Edwards common stock would be $14.33, for a transaction value of some $1.75 billion. The consideration will be paid in $863 million in cash and 52.6 million new PeopleSoft shares.
J.D. Edwards stockholders have their choice to receive $7.05 cash, plus 0.43 of a PeopleSoft common share for each share of common stock they own, a fraction of a PeopleSoft common share, or a combination of cash and a fraction of a PeopleSoft common share.
Monday's deal is roughly $500,000 sweeter for shareholders than the original plan, which was an all-stock deal. In that deal, worth about $1.7 billion, PeopleSoft offered stockholders 0.860 PeopleSoft common shares for each outstanding J.D. Edwards common share, based on the closing price of PeopleSoft stock on May 30 and J.D. Edwards' shares outstanding.
"This combination of J.D. Edwards and PeopleSoft is a perfect match of two extraordinary and highly complementary companies and is the product of careful, reasoned study," said J.D. Edwards Chairman, President and CEO Bob Dutkowsky. "The amended definitive agreement allows the companies to capture near-term financial synergies and deliver long-term stockholder value."
PeopleSoft, which said the new deal would provide annual synergies in the range of $150 million to $200 million, expects to commence the exchange offer soon. If completed, any remaining J.D. Edwards shares would be acquired in a second-step merger, the companies said, and J.D. Edwards stockholders would own 14.3 percent of the combined company.
"Here they go again," said Jim Finn, an Oracle spokesperson, in a statement. He called the latest merger amendment between J.D. Edwards and PeopleSoft an attempt to take away the shareholders' vote.
"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. This move does not deter Oracle and our offer remains before shareholders."
Deutsche Bank Securities said the news was good for J.D. Edwards shareholders, because it "increases the likelihood" that the deal will go through. The firm said it expects a reaction from Oracle.
Monday's announcement is the latest serve and volley between PeopleSoft and Denver's J.D. Edwards and their nemesis Oracle. Last week, first J.D. Edwards and then PeopleSoft sued Oraclefor, among other things, tortious interference, after it aggressively bid to acquire PeopleSoft only five days after PeopleSoft offered to merge with J.D. Edwards.
Throughout, Redwood Shores, Calif.'s Oracle has been dismissive of the lawsuits, some of which are aimed personally at Oracle CEO Larry Ellison, and has vowed to continue its pursuit of PeopleSoft.
"PeopleSoft seems to have revived its on-again, off-again litigation strategy," said Oracle's Finn Friday. "This matter must be decided by PeopleSoft shareholders and not by frivolous litigation. As for PeopleSoft's cryptic reference to its secret 'discussions' with J.D. Edwards, any action by the PeopleSoft board to take the vote away from PeopleSoft shareholders and to further entrench themselves would only compound their abuse of fiduciary duty."
What no one disputes is that the fierce fighting has shaken the industry to the core, with market leader SAP perhapssitting pretty as the lone benefactor. Analysts have said that even if Oracle fails in its quest, it will have seriously disrupted PeopleSoft's sales cycle. Deutsche Bank Securities said it expects PeopleSoft's sales quarters for the last three weeks of June to be disrupted because of the lingering issues.
"We believe that new deal flow has come to a virtual halt and that customers are postponing plans to continue existing implementations until questions about PSFT's long-term stability/viability become more clear," the research firm said last week.
The amended transaction is expected to close in the third calendar quarter of 2003.