PeopleSoft Starts J.D. Edwards Buy-In

The business applications company is offering J.D. Edwards shareholders cash or PeopleSoft common stock valued at $7.05 in cash plus the value of 0.43 of a PeopleSoft common share for each share of J.D. Edwards common stock owned.

Given PeopleSoft's closing price of $16.92 per share on June 13, the value of the deal would be about $1.75 billion, based on 122.4 million J.D. Edwards shares outstanding, said PeopleSoft, which on June 2 proposed a $1.7 billion stock deal. J.D. Edwards shareholders can opt for all cash or all stock.

The exchange offer and withdrawal rights are scheduled to expire at midnight EST on July 17, unless extended, PeopleSoft said.

Oracle, however, has showed no sign of weakened resolve in its hostile bid for PeopleSoft, which now stands at $6.3 billion, or $19.50 per share. In a teleconference early Wednesday, Oracle CFO Jeff Henley reiterated Oracle's intent to buy PeopleSoft but would not say whether the database company plans to continue with a purchase of J.D. Edwards. At one point, Oracle executives had said they would finish the PeopleSoft bid and then evaluate a possible acquisition of J.D. Edwards.

"J.D. Edwards is an unprofitable company, which has never reported annual operating margins greater than 11 percent and [has had] single-digit margins for most of its history," said Henley Wednesday morning.

Asked whether Oracle might pursue a J.D. Edwards deal, he demurred: "Nothing's changed. We're focused on the PeopleSoft offer we've made. We'll take that and deal with J.D. Edwards later."

Also on Wednesday, the state of Connecticut filed an antitrust suit against Oracle in Hartford, alleging that the proposed PeopleSoft buyout would stifle competition and raise prices. (See story.)

In a conciliatory letter to Connecticut Governor John Rowland and Attorney General Richard Blumenthal, Oracle Chairman Larry Ellison pledged continued support for PeopleSoft applications and said there would be no forced migrations to Oracle products. "Oracle will continue to support PeopleSoft products," Ellison wrote. "You will be able to purchase additional PeopleSoft licenses, and we will protect the significant technology investments that all customers have made.

"It has never been our intention to force any customers to migrate to Oracle applications. In fact, we have consistently said that we would extend PeopleSoft's current support deadlines, providing service through our much larger global support organization," Ellison stated in the letter.

The stark wording of the June 6 press release announcing Oracle's tender offer made it clear, however, that the PeopleSoft product line would be dead-ended if the companies were to be combined. At that time, Oracle said it would "not be actively selling PeopleSoft products to new customers [but would incorporate] the advanced features from the PeopleSoft products into future versions of the Oracle eBusiness Suite."

But Ellison did pledge continued support for PeopleSoft customers in a subsequent conference call.

Whatever happens, business for J.D. Edwards and PeopleSoft has been hurt in the short term, solution providers said. One Boston-area integrator with a PeopleSoft practice said no consultant would advise purchases from those companies until the situation is resolved. "At the very least, this gives buyers an opportunity to say to PeopleSoft or J.D. Edwards, 'You better sharpen your pencil; we're going to bargain,' " he said.

As of Thursday morning, Oracle was trading at $13.39. PeopleSoft was trading at $17.83, and J.D. Edwards stood at $14.12.

For more on this story, visit CRN's PeopleSoft News Center