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PeopleSoft: new obstacles for Oracle

Board coup that much harder

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PeopleSoft has acquired majority control of JD Edwards.

PeopleSoft said on Friday that it has won majority control of JD Edwards, having seen 88% of its shares tendered, and expects to bring the company fully into the fold before the end of August. PeopleSoft's success will put several new hurdles in Oracle's way.

PeopleSoft is now the world’s second largest enterprise software company, sandwiched between leader SAP and Oracle, the latter of which still says it intends to acquire PeopleSoft whether its management likes it or not.

The deal is expected to boost PeopleSoft’s earnings per share straight away. When the merger was announced in early June, the companies said they would generate $2.8 billion in annual revenue and hold 17% of the enterprise software market.

Where PeopleSoft sells well in high-end enterprises, JD Edwards is a mid-market specialist. PeopleSoft has strength in human resources, which JD Edwards lacks, while JD Edwards offers supply chain software, one of PeopleSoft’s weak points.

JD Edwards stockholders who tendered their shares will get $14.7384 in cash, PeopleSoft stock or a combination of cash and stock for each share. Those who didn’t will get $7.05 cash and 0.43 of a PeopleSoft share per JD Edwards share.

The closure of the $1.8 billion deal, while expected, throws additional obstacles in the way of Oracle’s hostile bid, the most obvious being that Oracle will have to offer more money because there are now more shares on the market. There is also the potential now that regulatory oversight of Oracle’s takeover bid could intensify.

Adding to these obstacles, Michael Maples, a member of JD Edwards’ board of directors, joins PeopleSoft’s board as part of the deal. There are now eight PeopleSoft directors, which will make it harder for Oracle to attempt a board coup next May.

Oracle has previously indicated that it would launch a competing slate of takeover-friendly directors to replace the four PeopleSoft directors whose terms expire next year. With a seven-member board, Oracle could have seized a majority.

Source: Computerwire/Datamonitor

Recommended research: Datamonitor, "Oracle vs. PeopleSoft: Shakeup in CRM" (BFTC0862)

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