PeopleSoft Says J.D. Edwards Deal Is Done

The software companies will merge but Oracle says it will keep pursuing PeopleSoft.
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Updated from July 17

PeopleSoft

(PSFT)

announced Friday morning it completed its friendly acquisition of

J.D. Edwards

(JDEC)

, a move that will bolster its own fight against a hostile takeover by

Oracle

(ORCL) - Get Report

.

PeopleSoft said it had purchased 88% of the J.D. Edwards shares outstanding and would move to acquire the rest before the end of August.

Now valued at $1.8 billion, the J.D. Edwards deal has moved quickly to completion since it was

announced on June 2 despite strenuous efforts by Oracle to block it.

However, Oracle isn't ready to throw in the towel. With the deal likely less than 24 hours from completion, a spokesman for the database giant said: "We believe time is on our side. Oracle remains committed to acquiring PeopleSoft -- even with the addition of J.D. Edwards."

PeopleSoft execs say J.D. Edwards will help their company win mid-market customers -- that is, companies with annual sales ranging from roughly $50 million to $500 million -- and add depth to its distribution and manufacturing offerings.

Both PeopleSoft and J.D. Edwards develop and sell software applications that help companies track customers, manage human resources and exchange information with suppliers. Oracle, of course, is the leading supplier of databases, and also sells applications, but with less success than PeopleSoft or

Siebel

(SEBL)

.

J.D. Edwards' top management team will stay with PeopleSoft during a transition period and will then leave with

parachutes gleaming.

The combined companies will have yearly sales of $2.8 billion, 13,000 employees and 11,000 customers in 150 countries. Oracle has $10 billion in revenue, more than 40,000 employees and 250,000 customers in 120 countries.

But

SAP

(SAP) - Get Report

, the current market leader in enterprise software applications, is larger than even a combined Oracle, PeopleSoft and J.D. Edwards. Some analysts think the turmoil could even

benefit the German software giant, as confused customers run to a seemingly safer harbor.

SAP's sheer size and market leadership is one reason many analysts think that the Justice Department, which is now reviewing the proposed takeover of PeopleSoft, will decide that the move would not be anticompetitive. Earlier in the month, the feds decided

not to review the acquisition of J.D. Edwards, a move that made consummation of the deal a certainty.

Although nothing but a highly unlikely last-minute court order can stop PeopleSoft and J.D. Edwards from merging, the fate of Oracle's attempted takeover of PeopleSoft is far from settled.

Numerous lawsuits have been filed by shareholders, the state of Connecticut, and each of the three companies directly involved. Perhaps even more importantly, Oracle shows no signs of backing down, and CEO Larry Ellison has said he is prepared to wait for PeopleSoft's next shareholder meeting in the spring of 2004 to wage his proxy fight.

Many analysts expect Ellison to raise his offer, now at $19.50 a share, to $21 or $22; a few think he could push it as high as the mid-twenties.

One thing is certain: Oracle now has a much tougher fight on its hands. The combined companies will be more expensive to buy and significantly tougher to manage.

Score this round for PeopleSoft. But don't count on Oracle throwing in the towel just yet.