Update: Oracle to buy PeopleSoft for $10.3B

Oracle has signed a definitive agreement to acquire PeopleSoft for $26.50 per share, or approximately $10.3 billion, the companies said Monday, ending an acrimonious takeover battle that has lasted for more than 18 months.

The transaction has been approved by both companies' boards of directors and is expected to close in late December or early January. The agreement followed discussions between the companies throughout the weekend, PeopleSoft said in a statement.

PeopleSoft's board decided that Oracle's latest offer provides good value for PeopleSoft's stockholders, the company said. The agreement ends a long, emotional struggle, it said.

The customers Oracle gains from PeopleSoft will allow it to invest more in applications development and support, Oracle said in a separate statement, repeating an argument the company has been making for the past year and a half as it fought to win support from PeopleSoft's shareholders, executives and customers.

The companies had been scheduled to meet later Monday in Delaware Chancery Court to give depositions over PeopleSoft's "poison pill" provision, aimed at blocking a hostile takeover attempt. The poison pill allows PeopleSoft to significantly inflate its number of outstanding shares in case of a takeover bid, making a buyout prohibitively expensive.

The companies now plan to put their litigation on hold and drop the claims entirely when the merger is complete, PeopleSoft said in its statement.

The agreement came about after a representative from PeopleSoft approached Oracle over the weekend, according to Larry Ellison, Oracle's chief executive officer, who discussed the deal during the company's quarterly earnings call Monday.

"We met throughout the weekend and PeopleSoft gave us financial details that allowed us to analyze the transaction even better. We were able to assess the real value of the deal," he said.

The sum Oracle has agreed to pay is $2.50 per share higher than the "final" offer it made for PeopleSoft at the start of November.

"This merger works because it increases our ability to sell into the applications marketplace; it doubles our installed base and increases our sales force," Ellison said.

Oracle plans to develop a suite of business applications that merges features from the products sold by Oracle, PeopleSoft and the former JD Edwards, which PeopleSoft acquired last year for $1.8 billion, Ellison said. That product is still two to three years out, he said. In the meantime, Oracle will enhance PeopleSoft 8 and JD Edwards 5, and also release upgrades to both those suites, he said.

"Customers should think of upgrading before they get the idea of moving to a merged product. It is some ways away," Ellison said.

"PeopleSoft 9 and JD Edwards 6 will come out about 18 months from now. Actually, 12 to 24 months is a safer range," he said, admitting that the company is still at the "guessing stage" about product delivery schedules.

The plans are somewhat at odds with Oracle's earlier statements, but bringing the affair to a conclusion, and creating a more viable competitor to market leader SAP, is good for the industry and for both companies' clients, according to Philip Carnelley, a research director with UK analyst company Ovum.