The three companies are dominant players in the market for ERP (Enterprise Resource Planning) software, basically software that helps a business to manage, diverse processes that include product planning, parts purchasing, maintaining inventories, interacting with suppliers, providing customer service and tracking orders.
Signs of consolidation in the ERP market began on 2nd June when PeopleSoft and JD Edwards announced a definitive agreement for PeopleSoft to acquire JD Edwards, creating the world's second largest ERP software company, in a transaction valued at approximately $1.7 billion.
Combined, the companies have approximately $2.8 billion in annual revenues, 13,000 employees and more than 11,000 customers in 150 countries.
But on 6th June, Oracle submitted a cash tender offer of $16 a share to PeopleSoft – a deal which did not include the proposed acquisition of JD Edwards. Oracle, chaired by Larry Ellison, is the world's second largest software company, after Microsoft.
In a statement, PeopleSoft CEO Craig Conway called the move "atrociously bad behaviour from a company with a history of atrociously bad behaviour. Obviously it is a transparent attempt to disrupt the acquisition of JD Edwards by PeopleSoft announced earlier this week".
JD Ewards CEO Robert Dutkowsky told a press conference early last week that Oracle's takeover would create "serious antitrust problems." These, he said, would need months of investigation by regulators in both the US and Europe.
Oracle's offer was put to PeopleSoft's board on Thursday, and the directors voted unanimously to recommend that stockholders reject Oracle Corporation's unsolicited bid.
The board concluded that the offer would undoubtedly face lengthy antitrust scrutiny, with a strong likelihood that approval would not be granted. According to the board, the delays and uncertainties created by Oracle's offer, coupled with Oracle's stated intent to discontinue PeopleSoft's products, represent a substantial threat to stockholder value.
Dutkowsky welcomed the board's decision, commenting, "JD Edwards and PeopleSoft share the firm conviction that Oracle's hostile action benefits Oracle alone and is designed to disrupt the momentum of both of our companies, and the technology marketplace."
But the matter is far from over, and unless the board can persuade its shareholders to take the same line, then Oracle's takeover could succeed.
On Friday morning, JD Edwards filed a lawsuit in the Colorado state court claiming that Oracle has "tortiously interfered" with its proposed merger with PeopleSoft. The suit seeks $1.7 billion in compensatory damages and an unspecified amount in punitive damages.
JD Edwards has also filed suit in the California state court, against Oracle and two of its executives. The California suit alleges that Oracle, Larry Ellison and Chuck Phillips, Oracle's executive vice president, have engaged in wrongful conduct and unfair business practices. It seeks an injunction that stops Oracle from proceeding with its tender offer for PeopleSoft.
In response, Jim Finn, an Oracle spokesperson, said in a statement:
"Allegations raised in the JD Edwards lawsuit are nothing more than a smokescreen. This is a tactic designed solely to distract PeopleSoft shareholders from making a choice while PeopleSoft management remains intent on keeping hefty pay packages and neglecting the best interests of shareholders."
PeopleSoft joined the action late Friday, filing a petition to prevent the takeover proceeding.
Jim Finn added, "PeopleSoft seems to have revived its on-again, off-again litigation strategy".
He concluded:
"This matter must be decided by PeopleSoft shareholders and not by frivolous litigation. As for PeopleSoft's cryptic reference to its secret 'discussions' with JD Edwards, any action by the PeopleSoft board to take the vote away from PeopleSoft shareholders and to further entrench themselves would only compound their abuse of fiduciary duty."