Oracle Offers to Buy PeopleSoft for $5.1 Billion

Database giant Oracle said it has offered to purchase all outstanding shares of enterprise application company PeopleSoft in a cash deal valued at about $5.1 billion.

On Friday, Oracle said it is offering $16 per share for the company as part of its announcement that it would meet or exceed consensus earnings estimates for the fiscal fourth quarter.

The deal comes just days after PeopleSoft bid to buy rival J.D. Edwards, a mid-market business applications provider, for $1.7 billion in stock. That deal, if made, could give PeopleSoft considerable heft over rivals Oracle and Siebel in the market.

Oracle Chairman and CEO Larry Ellison said on a conference call Friday that if the bid is successful, Oracle would not actively sell PeopleSoft software to new customers, but will instead opt to bundle features from PeopleSoft products into future versions of the Oracle eBusiness Suite, as well as support all PeopleSoft products.

He said PeopleSoft developers would join Oracle’s eBusiness Suite team to continue supporting PeopleSoft platforms 7 and 8 to make sure customers were taken care of.

Ellison said the deal is not so out of place as the public would think, revealing that PeopleSoft CEO Craig Conway approached him about merging both PeopleSoft’s and Oracle’s applications businesses. Though interested at the time, Ellison said he and Conway could not agree how such a deal would be structured.

Ellison went on to say that he and his management team looked at the PeopleSoft bid for J.D. Edwards and decided to “make an offer that is better for PeopleSoft shareholders.”

“Based on performance of PeopleSoft in the market, which has experienced rapid declines in licensed revenue, we think they proposed a risky merger with J.D. Edwards, with minimum savings. Our alternative is a safer road. Shareholders can take that $16 and go out and invest in the combined company.”

Jeff Henley, Oracle Executive Vice President and CFO, said he expects the acquisition would increase Oracle’s earnings per share from the first combined quarter.

Henley stressed on the call that Oracle expects a smooth, seamless transition because it will not be integrating PeopleSoft’s software into its own portfolio. Instead, the developers will keep PeopleSoft products current and make its easy for users to upgrade from PeopleSoft 7 or 8 to Oracle’s eBusiness Suite.

Ellison said he has offered to discuss his company’s plan with PeopleSoft’s board of directors. Oracle expects to commence the tender offer on Monday June 9 and Ellison said that if everything goes according to plan, Oracle could completely merge with PeopleSoft as early as July.

In related news, Oracle said it expects to report fiscal fourth quarter GAAP earnings per share of 14 to 15 cents. Oracle will provide more detail on its quarterly results on an earnings conference call on June 17.

PeopleSoft had no immediate response to the bid as of presstime.