Oracle makes bid for PeopleSoft

Four days after application software provider PeopleSoft signed a $1.7 billion deal to buy J.D. Edwards & Co., an even bigger fish announced this morning it wants to swallow PeopleSoft.

Oracle Corp., the world's biggest enterprise software company, made a $5.1 billion cash offer for PeopleSoft. It said the tender offer would begin Monday.

"We think the time is right to present shareholders with an alternative plan," Larry Ellison, Oracle's chairman and CEO, said in a pre-dawn teleconference with analysts. The deal would be "a much safer road for PeopleSoft shareholders."

Oracle's $16-a-share offer is nearly $1 above the Thursday closing price of PeopleSoft stock, which has hit a 52-week low of $11.75 and a high of $22.50.

The price, about a 6 percent premium over yesterday's close, "is based on the performance of PeopleSoft in the market ? their stock price has been sinking," Ellison said.

The deal, yet to be reviewed by PeopleSoft's board, also would require shareholder and regulatory approvals.

The deal could mean that the J.D. Edwards acquisition might be called off, although Jeff Henley, Oracle's chief financial officer, said "we are certainly interested in Edwards ? It's simply a matter of the terms of the deal and the price of the deal." In a statement, Oracle said it would "review whether, and on what terms, Oracle would support that transaction."

Analysts note that Oracle and PeopleSoft products overlap in some areas and Ellison, Oracle's high-profile leader for more than two decades, pointed to synergies: "Most PeopleSoft customers are running on Oracle databases."

Oracle said it would offer "enhanced support" including putting advanced features of PeopleSoft software into new versions of Oracle eBusiness Suite.

Oracle, based in Redwood Shores, Calif., has hired Credit Suisse First Boston as an adviser and for bridge financing.

Oracle executives, labeling the deal "an acquisition of consolidation," said there would be opportunities for cost-cutting to eliminate duplication while at the same time combining talent for better products.

(Posted 8:29 a.m. June 6, 2003 Updated 9:17 a.m.)