Oracle to Buy PeopleSoft for $10.3B

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UPDATE: Oracle’s dogged pursuit of
PeopleSoft was rewarded on Monday as PeopleSoft’s
board of directors agreed to sell the company for $10.3 billion. The
announcement ends a long legal fight over the rights to the business
application giant.

Oracle will pay $26.50 per share for its rival, higher than its last
bid of $24. The deal is expected to close in early January, capping off
18 months of tense legal battles and market unrest that shook
PeopleSoft.

“After careful consideration, we believe this revised offer provides
good value for PeopleSoft stockholders and represents a substantial
increase in value from October,” said A. George “Skip” Battle, chairman
of PeopleSoft’s Transaction Committee. Battle also thanks PeopleSoft
employees for sticking through the unstable conditions precipitated by
the hostile merger.

The deal heads off a Delaware court meeting this week in which
PeopleSoft was expected to answer questions from Delaware Chancery Court
Judge Leo Strine about the company’s “poison pill” and customer rebate
provisions.

The judge was also expected to ask why PeopleSoft’s board continues
to hold out for more money after a poll of shareholders found 61 percent
would be happy to sell the company for $24-per-
share.

PeopleSoft’s acquiescence renders further court proceedings moot. The
two companies agreed to stay all pending litigation, including
PeopleSoft’s $1 billion civil lawsuit against Oracle scheduled for next
month until the consummation of the deal. All litigation will be thrown
out should the merger succeed, the companies said.

Oracle CEO Larry Ellison said in a statement he expects the purchase
to be 1 cent accretive in the fourth quarter of fiscal year 2005, about
2 cents a quarter, or 8 cents per year, in 2006, and a bit more in 2007.

“Today we announced both a great quarter and the agreement to acquire
PeopleSoft,” Ellison said, noting that Oracle’s applications business
grew 57 percent in its most recent quarter. “This merger gives Oracle
even more scale and momentum.”

Ellison also promised to extend support for PeopleSoft customers
worldwide. The Redwood Shores, Calif., company will enhance PeopleSoft 8
and develop a PeopleSoft 9, as well as enhance JD Edwards 5 and develop
a JD Edwards 6.

Oracle’s latest offer will expire at midnight EST on
Dec. 28.

“I’m surprised they paid as much as they did, but there was a sense
that they want to move faster in the market, Philip Fersht, an analyst
with Yankee Group told internetnews.com. “They are taking on SAP
and there was a feeling that they needed to get this thing closed. It
also became a personal thing for Larry Ellison and to back out now would
have been disappointing.”

In related news, Oracle reported second quarter earnings of 16 cents
per share, compared to 12 cents for the same period last year. Net income grew
32 percent to $815 million in the quarter; revenues were up 10 percent
to $2.76 billion.

For the third quarter, Oracle expects revenue to total $2.7 billion
to $2.79 billion on 14 cents to 15 cents per share.