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PeopleSoft, J.D. Edwards amend deal

The new plan between the two business software makers calls for a combination cash/stock merger, instead of an all-stock deal.

PeopleSoft and J.D. Edwards have changed the terms of their $1.7 billion merger, switching from an all-stock deal to a stock-and-cash transaction.

The move is most likely an attempt to fend off database giant Oracle's hostile takeover bid for PeopleSoft, launched a just a few days after the J.D. Edwards merger was announced June 2.

The amended plan calls for PeopleSoft to pay $863 million in cash and issue 52.6 million shares of its stock in exchange for J.D. Edwards.

J.D. Edwards shareholders will get $7.05 plus 0.42 of a PeopleSoft common share for each J.D. Edwards share.

The shareholders will also have the option of taking the original stock deal. The original terms between the two business software makers called for J.D. Edwards shareholders to get 0.86 of a PeopleSoft share for each J.D. Edwards share.

By offering a combination of cash and stock, the new deal removes some of the diluting effect the initial deal had on PeopleSoft shares. That's because by paying cash, the company must issue fewer new shares, meaning the deal will have less of an effect on earnings per share.

And by offering fewer new shares of stock, PeopleSoft will avoid having to put the matter to a vote of shareholders, because the number of shares issued falls under the threshold that would require shareholder approval.

PeopleSoft also said that in comparison to the previous deal, the new one will more "significantly" add to the bottom line of the combined companies.

However, in a statement late Monday, Oracle claimed that by changing the terms of the deal PeopleSoft was trying to eliminate the need for its shareholders to approve the J.D. Edwards acquisition.

"PeopleSoft is doing everything it can to prevent its shareholders from voting," CEO Larry Ellison said in the statement. "If PeopleSoft's board is so convinced that the J.D. Edwards acquisition is a great deal, why won't it let their shareholders vote on it?"

Responding to Ellison's remarks, PeopleSoft spokesman Steve Swasey said that while the revised deal no longer requires PeopleSoft shareholder approval, that was not the reason for altering the deal.

"We changed it to protect our shareholders and to provide more certainty to our customers," he said.

The new deal raises the offer for J.D. Edwards by $50 million to $1.75 billion. PeopleSoft asserts that the new deal will speed up the integration process and help the companies realize cost savings from the merger more rapidly.

PeopleSoft now expects the deal to close in the third quarter of this year, said Steve Swasey, director of corporate public relations. Earlier, the company had said the deal would close toward the end of the quarter, and possibly not until the fourth quarter.

PeopleSoft said it now expects the combined companies to save $150 million to $200 million on an annual basis, starting in 2004. Previously, executives had said the merger would save the combined companies $80 million annually within the first full year.

Oracle CEO Larry Ellison had pointed to that earlier savings figure as one reason that shareholders should instead choose his takeover bid, asserting that an Oracle deal would add to the bottom line in the first combined quarter. Oracle's bid has prompted lawsuits from both PeopleSoft and J.D. Edwards.

"If you consider that PeopleSoft and J.D. Edwards put together the best financing approach when they announced their original merger, this sub-optimal approach can only be a ploy to preserve management's self-interest," Oracle spokesman Jim Finn said in a statement.

PeopleSoft and J.D. Edwards assert that the amended deal is designed to "minimize customer uncertainty," allowing the two companies to speed up their integration plans.

"The amended definitive agreement allows the companies to capture the near-term financial synergies and deliver long-term stockholder value," J.D. Edwards CEO Bob Dutkowsky said in a statement.'s Ina Fried contributed to this report.