Oracle & PeopleSoftPaulo Arantes Junqueira, Linde Cook | April 23, 2015

Objectives Analyze the acquisition of PeopleSoft by Oracle. Assess the results of the process.

Introduction

04/15/23 2

Structure

BackgroundInformation

Industry: Information Technology

Sub-industry: Business software

Type of acquisition: Horizontal and hostile

Main players: Microsoft, SAP AG, IBM, Oracle and PeopleSoft.

Background Information

04/15/23 4

Background Information

04/15/23 5

Revenue: $ 10.2 bi in 2003Employees: 41,000Main business: Flagship database systemsCulture: based on “the ruthless, take-no-prisoners attitude of Larry Ellison”

Revenue: < $ 3 bi in 2003Employees: 11,600Main business: Application Softwares (financial, human-resources)Culture: ‘PeoplePeople’ friendly corporate culture, caring of customers and partners.

The Acquisition Saga

June 2, 2003: PeopleSoft announces the acquisition of J.D. Edwards. June 6, 2003: Oracle makes a hostile tender offer on PeopleSoft of $5.1 bi (9% premium). June 12, 2003: PeopleSoft board rejected the offer. June 18, 2003: Offer increased to $6.3 bi or $19/share (12.5% premium). Deadline on July 18. PeopleSoft decided to cite antitrust concerns. Microsoft and SAP have considered merging.

The Acquisition Saga

04/15/23 7

August, 2003: While waiting for the decision, PeopleSoft attempted a Poison Pill defense, (‘flip-in’ - 18%) to allow shareholders more voting power against Oracle.

Due to the uncertainties, PeopleSoft was losing clients to SAP (Safe Passage Program).

The Acquisition Saga

04/15/23 8

"It's consistent with what PeopleSoft's board has said all along: that Oracle's offer undervalues the company and involves unacceptable risks

for stockholders.”

Steve Swasey, Director of Corporate RelationsAccusations between Craig Conway and Larry EllisonFebruary 26, 2004: DOJ decided it would challenge the transaction.Oracle hired Jim Rill, former Head of Antitrust Division of DOJ, Jim Miller, former Chairman of the FTC and former Senator Tim Hutchinson to start a fight with the DOJ. “Oracle against the USA”

The Acquisition Saga

04/15/23 9

European Commission was also reviewing the case but Oracle was able to stop the investigation in order to gather more information. Oracle had a favorable decision over the DOJ, with Elzinga, member of the DOJ, defining the geographic market as international.

The Acquisition Saga

04/15/23 10

PeopleSoft’s BOD rejects five offers from Oracle.

November, 2004: Oracle offers “best and final offer” $24/share that 61% of shareholders supported. BOD still declined.

December, 2004: Oracle offers $26.50/share. PeopleSoft’s BOD votes for the sale on Sunday, December 12.

“This is a sad day for me and, I’m sure, an equally sad day for you. To those who will lose their jobs, I offer my sincere apologies for not figuring out a different conclusion to our 18-months saga.”

David Duffield, PeopleSoft’s CEO and founder

The Acquisition Saga

04/15/23 11

Oracle purchased 97% of outstanding common stock at $26.50/share in cash on January 6, 2005

The Acquisition Saga

04/15/23 12

Component Value ($ bil)

Goodwill 6.253

Intangible Assets 3.384

Tangible Assets 1.410

R&D Expense 0.033

Total Purchase Price

11.08

All court cases, including Oracle’s suit to remove PeopleSoft’s poison pill defense are dismissed.

Oracle now seen as a significant competitor with SAP.

Oracle avoids $2 billion in guarantees to PeopleSoft customers.

The Acqusition Saga

04/15/23 13

Assessing the Results

Both Oracle and PeopleSoft share prices rose by 10% after the announcement of the acquisition.

Oracle maintains bulk of PeopleSoft engineers but cuts nearly half of PeopleSoft employees.

Integration plan was noted as quick and decisive, in order to stop losing clients.

Oracle required to maintain support programs with rival companies through PeopleSoft’s clients, especially from IBM.

Assessing the Results

04/15/23 15

After one year, Oracle maintains 95% of PeopleSoft customers.

Oracle stock performance remains lackluster for one more year.

Oracle only shows advantage over SAP at late 2006.

Assessing the Results

04/15/23 16

Oracle was able to grow its Market Capitalization in relation to competitors.

Assessing the Results

04/15/23 17

Conclusion

Acquisition was successful, but Oracle had to pay a high price for that and spent too much effort.

Oracle defeated DOJ antitrust suits (other companies to use Oracle as example).

Oracle maintains PeopleSoft’s clients.

Conclusion

04/15/23 19

References:

Bank, David. "After 18-Month Battle, Oracle Finally Wins Over PeopleSoft." WSJ. Wall Street Journal, 14 Dec. 2004. Web. 22 Apr. 2015.

Bloomberg L.P. (2015) Market Capitalization for Microsoft, IBM, SAP, PeopleSoft and Oracle from 2000 to 2014. Retrieved April 21, 2015 from Bloomberg terminal.

Bloomberg L.P. (2015) Shares Outstanding for PeopleSoft 2/28/03 to 5/31/04. Retrieved April 21, 2015 from Bloomberg terminal.

Gilbert, Alorie. "Oracle to PeopleSoft: The Pink Slip's in the Mail - CNET News." CNET News. CBS Interactive, 14 Jan. 2005. Web. 22 Apr. 2015.

Kawamoto, Dawn. "Oracle-PeopleSoft Merger Hits One-year Mark - CNET News." CNET News. CBS Interactive, 11 Jan. 2006. Web. 22 Apr. 2015.

La Monica, Paul R. "Oracle Finally Reaches Deal to Buy PeopleSoft for $10.3B." CNNMoney. Cable News Network, 13 Dec. 2004. Web. 22 Apr. 2015.

Oracle Corp. (2015). Form 10-K 2007. Retrieved from Oracle website http://www.oracle.com/

Rosch, J. Thomas. Federal Trade Commission. Menlo Park. Federal Trade Commission, 2012. Print.

References

04/15/23 20

Oracle & PeopleSoftPaulo Arantes Junqueira, Linde Cook | April 23, 2015