Software maker offers $5.1 billion for rival

Michael Liedtke

Friday, June 6, 2003 | 10:16 a.m.

SAN FRANCISCO -- Business software maker Oracle Corp. launched an effort today to eliminate one of its biggest competitors with an unsolicited $5.1 billion offer to buy PeopleSoft Corp.

The all-cash bid translates into $16 per share, just 6 percent above PeopleSoft's closing price of $15.11 before Oracle's surprise offer.

PeopleSoft's shares soared $3.41 to $18.52 in early trading today on the Nasdaq Stock Market, indicating that investors expected Oracle to sweeten its offer. Oracle's shares gained 15 cents to $13.51 on the Nasdaq.

The surprise bid came four days after PeopleSoft announced an agreement to buy another rival, Denver-based J.D. Edwards & Co., in a stock swap valued at $1.9 billion.

PeopleSoft's expansion prompted Oracle to barge into the picture with a cash offer that it characterized as a less risky alternative to the J.D. Edwards merger.

"We think our $16 offer is a much safer road for the PeopleSoft shareholders," Oracle Chairman Larry Ellison told analysts in a conference call today.

Redwood Shores-based Oracle hopes to buy PeopleSoft before the deal with J.D. Edwards is completed. Oracle didn't rule out adding J.D. Edwards to the mix if it can take over PeopleSoft first.

Under Oracle's plan, the PeopleSoft name and products would eventually disappear. Without going into specifics, Oracle management also indicated PeopleSoft's roughly 8,000 workers could expect mass layoffs.

PeopleSoft, which is based in Pleasanton, had no immediate comment about Oracle's offer.

There's no guarantee that PeopleSoft will be receptive to Oracle's bid. The two companies have long had an acrimonious relationship, marked by tart sniping between Ellison and PeopleSoft President Craig Conway, once a top Oracle executive.

The two CEOs called a truce long enough last year to discuss a possible joint venture, Ellison revealed today.

In those discussions, Ellison said Conway discussed the possibility of creating an entirely new business comprised of the companies' so-called "enterprise application" software -- products used throughout corporate America to run everything from personnel departments to managing supplies.

Under that plan, Oracle's main business of making database software would have remained separate.

Ellison rejected that idea, but has since decided a marriage of both businesses "would be a very formidable player in the market." He said both Oracle and PeopleSoft need to muscle up to compete with German-based SAP, the world's largest maker of enterprise applications, and Microsoft Corp., which is expanding in the market.