Oracle's Acquisition of Peoplesoft

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Case Details:

Case Code : BSTR154
Case Length : 19
Pages Period : 2000-2005
Organization : ORACLE
Pub Date : 2005
Teaching Note :Not Available
Countries : United States
Industry : Information Technology and Related Services

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"The combination of these two companies brings together some of the best products and people in the enterprise applications market, all for the benefit of the customer."¹

- Larry Ellison, Chief Executive Officer, Oracle Corporation.

"After careful consideration, we believe this revised tender offer provides good value for PeopleSoft stockholders. PeopleSoft is a strong and vibrant company."²

- George Battle, Chairman, PeopleSoft's Transaction Committee.

Introduction

On January 07, 2005, Oracle Corporation, the second largest software company in the world, announced that it would acquire PeopleSoft Inc.³ at $10.3 bn.

The announcement followed a tender offer in which more than 97 percent of PeopleSoft's shareholders tendered their stock. Post-merger, Oracle would emerge as the second largest manufacturer of business application software in the world.

Oracle first made its hostile bid to acquire PeopleSoft on June 06, 2003. Meanwhile, in July 2003, PeopleSoft acquired JD Edwards.⁴ Oracle's acquisition of PeopleSoft finally materialized after an 18-month struggle between the two companies that involved multiple litigations and bitter exchanges between Oracle's Larry Ellison (Ellison) and the then PeopleSoft's CEO Craig Conway (Conway).

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The acquisition was unique in many ways. It raised corporate governance issues when Peoplesoft's shareholders opposed the use of poison pills by the company's management. It also led to debates regarding the use of poison pills and whether prevailing regulations required a review. It brought defeat to the US Department of Justice (DOJ) in an antitrust case, thus encouraging bigger consolidations in the software industry, in future.

It was also one of the most widely analyzed acquisitions due to the hostility involved, its huge scale, multiple litigations, and the deal price.

Oracle had initially announced that it would discontinue PeopleSoft's products. Later, the company changed its stand and stated that it would support the products and would not drop them immediately. Most analysts expressed doubts on the success of the merger.

However, Ellison was confident that it would work, "This merger works because we will have more customers, which increases our ability to invest more in applications development and support."⁵

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1] Oracle takes control of PeopleSoft -finally, AFP, December 29, 2004.

2] Stephen Taub , PeopleSoft Agrees to Oracle Deal, www.cfo.com , December 14, 2004.

3] Headquartered at California, USA, PeopleSoft is one of the major software companies that provided enterprise resource planning, human resource management, and customer relationship management software solutions to large corporations. In the fiscal 2003, PeopleSoft reported revenues of $2.3 bn and a profit of $85 mn.

4] Denver (US)-based JD Edwards was acquired by PeopleSoft on July 18, 2003, for $2 bn. JD Edwards' software products catered to small and mid-sized companies. They ran on a variety of hardware platforms as well as various database systems.

5] Oracle takes control of PeopleSoft -finally, AFP, December 29, 2004.