JD Edwards: We'll fight off Oracle

By ADAM GIFFORD

DENVER - Before the banns were even read, the marriage between enterprise software companies JD Edwards and Peoplesoft was thrown into turmoil by Oracle, with chief executive Larry Ellison acting as the jealous rival.

More than 8000 JD Edwards customers and partners have gathered in the company's home town, Denver, this week for the annual Quest user conference.

They had hoped to hear more details on the friendly US$1.7 billion ($2.9 billion) merger which would have swapped JD Edwards shares for PeopleSoft shares and made the combined entity the second largest in the enterprise applications market behind Germany's SAP.

Instead they will be waiting for details of Oracle's hostile US$5.1 billion bid for PeopleSoft which, if successful, would leave JD Edwards out in the cold.

JD Edwards spokesman Victor Chayet said the companies had a definitive agreement to complete the merger, which had taken more than eight months of top-secret negotiations to put together.

"We are determined to complete that merger," Chayat said. "We want to create the world's largest enterprise applications company.

"This is one of the most compelling mergers in software, which will give great value not only to shareholders but customers."

Oracle has had an eye on PeopleSoft in the past. PeopleSoft chief executive Craig Conway talked to Oracle executives last year but nothing came of it.

But the merger announcement seems to have caught Oracle on the hop. Its offer at US$16 a share is only 5.8 per cent more than PeopleSoft's Thursday closing price. The market pushed PeopleSoft shares up to US$17.82 on Friday and cut Oracle's price slightly.

Ellison said he was stepping in to offer PeopleSoft a better alternative to the "very risky" merger.

He then told a conference call Oracle would kill PeopleSoft's product lines and offer Oracle applications instead.

Chayet said that showed disdain for the choice PeopleSoft customers had already made about whose software they wanted to use to run their businesses.

Conway said the offer from Ellison, his former employer, was a transparent attempt to disrupt the merger and was "atrociously bad behaviour from a company with a history of atrociously bad behaviour" - a sentiment Chayet said JD Edwards executives endorsed.

The PeopleSoft merger could take several months to conclude because it needs shareholder and regulator approval.

While that might seem to give Ellison a time advantage, particularly if he found some way to increase the bid without burning up all of Oracle's US$5.5 billion cash, Chayet said both JD Edwards and PeopleSoft had "poison pill" clauses in their constitutions they could invoke.

While he would not divulge specifics, such clauses typically allow a company's board to take action once a hostile raider acquired a certain percentage of shares.

Actions could include authorising the board to issue restricted shares, which would not hold voting rights, or splitting the shares.

For example, a five-for-one split of PeopleSoft shares would require Oracle to shell out US$25 billion cash for the company.

There also has been speculation that PeopleSoft could switch its offer for JD Edwards to cash, speeding up the acquisition and burning off most of its own cash reserves and making itself less attractive to Oracle shareholders.

Whatever the outcome, SAP will be keen to use the disruption as an opportunity to push its own merits as a stable, secure software provider.

If Ellison does succeed and carries through on his threat to kill PeopleSoft products, every PeopleSoft customer will be back in the market - and on past form with those sorts of customers, SAP will win more than it lost to Oracle. * Adam Gifford is at the Quest conference as a guest of JD Edwards.