PeopleSoft Buys J.D. Edwards for $1.7B

In a move that significantly alters the business software landscape, PeopleSoft has announced it will buy J.D. Edwards in a deal worth US$1.7 billion.

Assuming it clears regulatory hurdles and wins the blessing of shareholders, the all-stock transaction will create the world’s second largest corporate software maker, behind Oracle. The merged company will have $2.8 billion in annual sales, 13,000 employees and approximately 11,000 customers.

The move gives PeopleSoft instant access to new markets, such as manufacturing, distribution and some services industries in which J.D. Edwards’ manufacturing integration platforms are strong sellers.

The merger values Denver, Colorado-based J.D. Edwards, which will become a wholly owned subsidiary of Pleasanton, California-based PeopleSoft, at a 19 percent premium over Friday’s closing stock price. J.D. Edwards shareholders will be able to swap each share for .86 shares of PeopleSoft.

Cross-Pollination

Investors reacted by sending J.D. Edwards shares sharply higher in early trading Monday, pushing the stock price up 11 percent to $13.06, while PeopleSoft’s stock price fell 5 percent to $15.51.

Although both companies are well respected in their own markets — PeopleSoft has become a dominant player in the customer relationship management field — they have been suffering from the overall tech spending slowdown. PeopleSoft said in April that it would see lower profits this year and was preparing to lay off 200 workers.

Win-Win?

However, the companies said that because they have little market overlap, both firms will see new sales opportunities created by the merger. In a conference call, executives said determinations about layoffs or other cost-cutting measures have not yet been made. The integration effort will be substantial: Taken together, the companies operate in more than 100 countries worldwide.

“We’ll be able to serve the entire enterprise software market in a way that no other vendor can,” said J.D. Edwards CEO Bob Dutkowsky.

PeopleSoft CEO Craig Conway noted that the merger will open up more mid-size enterprises to his company’s offerings, which are already widely deployed in larger companies.

More To Come?

Meanwhile, the industry landscape may not be done shifting. In recent weeks, published reports have speculated about an Oracle/BEA partnership. In fact, some corners of the technology industry have been the focus of heavy acquisition activity of late, especially the online search sector.

“Companies that can afford it are going to look for opportunities to grow this way in a downturn,” Morningstar.com stock analyst David Kathman told the E-Commerce Times. “They’re defensive moves for the short-term, mostly, but designed to pay off down the road when spending picks up again.”