Ellison creates turmoil with hostile $5.1 billion ambush on PeopleSoft

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Only days after PeopleSoft tried to buy itself into second place in the applications market by acquiring JD Edwards, Oracle CEO Larry Ellison has put the cat among the pigeons by making a $5.1 billion hostile takeover bid for PeopleSoft and casting doubt on whether the JD Edwards takeover would continue if he succeeds.

Ellison said he submitted a letter to PeopleSoft's Board of Directors in which he expressed his intention to discuss the offer with the board. "The acquisition of PeopleSoft will immediately make Oracle an even more profitable and competitive company," he said. "Although we will not be actively selling PeopleSoft products to new customers, we will provide enhanced support for all PeopleSoft products. Furthermore, we will be incorporating the advanced features from the PeopleSoft products into future versions of the Oracle eBusiness Suite."

Jeff Henley, Oracle's chief financial officer, said he expects the PeopleSoft acquisition to increase Oracle's earnings per share from the first combined quarter. "We expect there to be substantial cost savings and minimal business integration risk," he said.

It was not immediately clear how Oracle's bid for PeopleSoft would impact the J.D. Edwards' transaction, but clearly there is now doubt about whether it can be completed. "Once Oracle's acquisition of PeopleSoft is complete, it will review whether, and on what terms, Oracle would support that transaction," Oracle said in a statement.

Oracle's acquisition of PeopleSoft would be subject to regulatory approval and the amendment of PeopleSoft's shareholder rights plan. It would not be subject to due diligence or financing. Oracle said it expects to begin the offer on Monday. Credit Suisse First Boston has provided bridge financing and is advising Oracle on the transaction.

PeopleSoft was caught on the hop by the Oracle ambush and as of mid-Friday had not issued a public reaction to the takeover bid.

A full analysis of the Oracle bid and its explosive impact on the shape of the applications software market will follow on Monday

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