Three major events last week rocked the normally staid ERP software arena.
Oracle announced Friday its intention to acquire PeopleSoft with a $5.1 billion hostile takeover bid. PeopleSoft had earlier in the week announced plans to acquire rival J.D. Edwards in a $1.7 billion stock deal – a move which potentially would bump it to No. 2 in the ERP market behind SAP and ahead of rival Oracle. Meanwhile, Invensys announced a buyer for its Baan division: an investment group that plans to merge Baan with SSA Global Technologies (SSA GT) to create what could be the third- or fourth-largest ERP vendor – depending on how the top seats shake out.
On the Oracle front, the software giant said on June 9 it would commence a cash offer to acquire all outstanding shares of PeopleSoft for $16 a share, or $5.1 billion. Oracle said it had no plans to actively sell PeopleSoft products, but the company will provide enhanced support for them and incorporate some features into its own proprietary offerings.
The offer will be subject to customary conditions, Oracle said, including a redemption or amendment to PeopleSoft’s shareholders’ rights plan.
“The acquisition of PeopleSoft will immediately make Oracle an even more profitable and competitive company,” said Larry Ellison, chairman and CEO of Oracle, in a conference call. He said Oracle and PeopleSoft need to muscle up to compete with SAP, the world’s largest maker of enterprise applications, and Microsoft, which is growing in the market.
The deal is by no means a guarantee as Oracle’s Ellison and PeopleSoft President Craig Conway, once a top Oracle executive, have had a rancorous relationship over the years, experts say.
Should Oracle succeed in its PeopleSoft takeover attempt, the J.D. Edwards buy will be subject to review, Oracle said.
The Oracle offer casts a cloud of uncertainty over what could have been – and still might be – an advantageous deal for J.D. Edwards customers. If PeopleSoft remains independent and completes its J.D. Edwards acquisition, J.D. Edwards users stand to gain a vendor with strong finances and market presence, and the opportunity to access PeopleSoft technology not available from J.D. Edwards, such as analytic software and sophisticated human resources functionality.
Meanwhile, Baan customers should see greater resources committed to product development, because of SSA GT’s solid ERP focus and its expertise in serving manufacturing companies – an industry focus Baan shares.
But analysts also raised concerns about the proposed J.D. Edwards and Baan purchases.
Corporate consolidation eventually leads to product line consolidation, Aberdeen Group cautions. J.D. Edwards and Baan customers “need to carefully listen to their new vendor over the coming months to understand how their product line evolution will be handled and what it means for them,” Aberdeen analysts David Alshuler and Tim Minahan said in a brief.
PeopleSoft and J.D. Edwards traditionally have targeted different customers: PeopleSoft has focused on large companies in service industries, while J.D. Edwards has targeted midmarket companies in manufacturing and distribution industries. But product overlap between the two is cause for concern, says Kelly Spang Ferguson, principal analyst at Current Analysis.
If Oracle’s buyout attempt is thwarted and PeopleSoft completes the acquisition of J.D. Edwards, the deal will create an entity with an estimated $2.8 billion revenue and 11,000 customers. The two would gain “a critical mass to compete against Oracle and SAP that they didn’t have before,” says Jim Shepherd, senior vice president at AMR Research. “It gives them more development resources, more brand visibility, more people on the ground.”
Merging Baan – for which SSA GT owners General Atlantic Partners and Cerberus Capital Management are paying $135 million – with SSA GT will create an entity with almost $600 million in revenue and 16,000 customers.
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IDG News Service correspondent Scarlet Pruitt contributed to this story.
