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 US$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 US$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.
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.
The new deal raises the offer for J.D. Edwards by US$50 million to US$1.75 billion. PeopleSoft asserts that the new deal will speed up the integration process and help the companies realise 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 US$150 million to US$200 million on an annual basis, starting in 2004. Previously, executives had said the merger would save the combined companies US$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.
Oracle said Monday that the new deal will not deter its bid.
"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 "minimise 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 release.
