Oracle Grabs Control of Most PeopleSoft Shares

The results of the tender offer, made public by Oracle Wednesday, take Oracle one step closer to finalizing its $10.3 billion acquisition of PeopleSoft, a mammoth deal first proposed as a hostile bid more than 18 months ago. Until earlier this month, it had been a marriage resisted vociferously by PeopleSoft executives and board members. But now things are moving full steam ahead.

In a statement, Oracle officials say a subsequent offering period will begin today and expire Jan. 4. Oracle expects to gain at least 90 percent of the outstanding PeopleSoft shares during this second round, paving the way for the acquisition to close by the end of the year.

Wasting no time, Oracle founder and CEO Larry Ellison says the company is plowing ahead with the arduous integration required to blend the two huge firms. As part of that process, Oracle announced it has designated four representatives to serve on PeopleSoft's board, replacing the PeopleSoft board members who have resigned and giving Oracle majority board representation. Two board members will remain on the PeopleSoft board until the merger between the companies is completed, according to Oracle.

"We are moving forward quickly with the integration-planning process and have been pleased by the level of coordination as we combine the two organizations," said Ellison in a statement released today.

Duffield, who co-founded PeopleSoft in 1987 as an enterprise-software company best known for its human-resources applications, had recently been called back to run the show there when PeopleSoft's board decided to fire Craig Conway as CEO on Oct. 1. Conway had vehemently -" and very publicly -- fought against the Oracle buyout, vowing to acquiesce at no cost. Duffield, in jumping into the role, also said he had no intention of selling PeopleSoft to Oracle. But he qualified that statement, saying he wouldn't sell at the price Ellison was offering at the time. That price went up in December, eventually to $26.50 per share, and the PeopleSoft shareholders went for it.

One of the big first steps in the integration process will be in reconciling the staffing situation between the two companies. In a memo to PeopleSoft employees dated Dec. 15, Ellison says that he will strive to keep the best staffers from both companies, and that the new company's organizational structure will be revealed by Jan. 14, 2005. Wherever possible, employees will also be informed of their status by that date as well. He also indicated that the areas where the companies have the most redundancy are administrative in nature, implying that those functions stand to be cut back more than others.

As for products, the Dec. 15 memo states: "Our overall plan is to retain distinct development and support organizations for the Enterprise, EnterpriseOne and World Software product lines within the combined company," Ellison wrote. "The combination only works if we satisfy customers with great products and world-class support, including the ongoing involvement and dedication of PeopleSoft's current development and support teams."

Specifically, he says Oracle will continue to enhance PeopleSoft's products, with an "expectation" that version 9 of Enterprise and version 6 of EnterpriseOne will be released.

Ellison did not mention partners in the memo, but he did express his intention to "expand Oracle's current sales capacity with the addition of PeopleSoft's exceptional resources," to continue uninterrupted current professional services engagements of both companies, and to select a team of professionals from both firms to head up marketing for the single entity.