Oracle ambushes Peoplesoft with $5.1bn bid

Spanner in the works

By Drew Cullen • Get more from this author

Posted in Hardware, 6th June 2003 12:28 GMT

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Oracle has launched an ambush bid for Peoplesoft, just days after its target announced an agreed $1.7bn share offer for JD Edwards.

Oracle is offering $16 a share for Peoplesoft, valuing the enterprise apps firm at a cool $5.1bn. It has secured bridge financing from Credit Suisse First Boston to help fund the offer.

And it's talking victory already, even though Oracle hasn't started talks with the Peoplesoft board yet. Oracle says it will review support for Peoplesoft's proposed merger with JD Edwards and on what terms, on completion of the acquisition.

In a press statement (pdf) today, Oracle chairman and CEO Larry Ellison said: "The acquisition of PeopleSoft will immediately make Oracle an even more profitable and competitive company. Although we will not be actively selling PeopleSoft products to new customers, we will provide enhanced support for all PeopleSoft products. Furthermore, we will be incorporating the advanced features from the PeopleSoft products into future versions of the Oracle eBusiness Suite."

The company reckons that it will make substantial cost savings and says there are "minimal" business integration issues.

So why the bid and why now? The Ellison thesis on the future of enterprise apps vendors is well-known. In the long term, the best of breed players such as - yes - Peoplesoft and JDE and Siebel are toast. There will only be two enterprise apps vendors, both offering tightly integrated suites, left standing: SAP and Oracle.

However, the two big guys right now are SAP and IBM. SAP looks impregnable. And Peoplesoft and JD Edwards are, as analyst James Governor of RedMonk notes, intimately tied already with IBM. Their merger brings them even closer to IBM and strengthens the Big Blue camp.

This is why Peoplesoft is worth $5.1bn cash to Oracle.

It will be interesting to see how much of a fight Peoplesoft puts up. The reaction of the market (in the form of the Oracle's share price) will dictate ultimately the success of this audacious bid. ®