SAN FRANCISCO - Fending off rival Oracle Corp.'s takeover bid, PeopleSoft Inc. took control of J.D. Edwards & Co. yesterday with a $1.8 billion purchase that drives up the price Oracle would have to pay for the business software maker.
PeopleSoft said it bought 88 percent of J.D. Edwards' shares by exchanging them for newly issued stock and cash. Oracle Chief Executive Officer Larry Ellison offered to buy PeopleSoft for $19.50 share, or $6.3 billion. The new shares would increase that by $1.03 billion.
Ellison also would get less for the money, because PeopleSoft spent $863 million of its cash to buy J.D. Edwards. Combining PeopleSoft and J.D. Edwards means that Oracle would have more product lines to maintain and support should it persist with the takeover, an investor said. The company's bid may face more antitrust scrutiny as well.
Oracle remains committed to buying PeopleSoft, even with the addition of J.D. Edwards, Oracle spokesman Jim Finn said in a statement yesterday.
Buying J.D. Edwards vaults PeopleSoft into second place - ahead of Oracle - in the $20.6 billion market for software used in business tasks such as processing payroll and tracking inventory. SAP AG's 36 percent share dominates the market, AMR Research Inc. said. Oracle controls 13 percent; a combined PeopleSoft-J.D. Edwards would have 14 percent.
PeopleSoft said Michael Maples, a J.D. Edwards director, was elected to its board. Citigroup Inc. advised PeopleSoft on the purchase, and Morgan Stanley assisted J.D. Edwards. Citigroup and Goldman Sachs Group Inc. are advising PeopleSoft in its defense against Oracle.
While PeopleSoft effectively controls J.D. Edwards with its 88 percent stake, the acquisition would have closed yesterday if PeopleSoft had gained at least 90 percent of the shares. The company said it will buy the rest before the end of next month.
The company announced on June 2 that it was buying Denver-based J.D. Edwards to sell more software to companies with less than $1 billion in yearly sales and to expand its line of programs to automate manufacturing. Four days later, Ellison surprised PeopleSoft with a $16-a-share bid, saying Oracle offered a "much safer road" than a "very risky merger with J.D. Edwards."
PeopleSoft CEO Craig Conway, an Oracle employee for eight years until the early 1990s, called the bid "atrociously bad behavior by Oracle."
PeopleSoft's board later rejected the offer, saying it wouldn't win antitrust approval and offered too little to shareholders. Oracle raised its bid to $19.50 a share June 18 and again was rejected.
Oracle is suing PeopleSoft in Delaware Chancery Court, asking a judge to remove PeopleSoft's so-called "poison pill," which would flood the market with new shares to make a hostile takeover prohibitively expensive.
PeopleSoft's share rose 10 cents to $18 yesterday. Oracle's shares fell a penny to $12.08.