October 11, 1999 9:55 AM PDT

PeopleSoft, Vantive merge in $433 million deal

PeopleSoft and Vantive today said they agreed to merge in a stock-for-stock deal worth about $433 million.

For months, analysts have speculated that PeopleSoft, which develops enterprise resource planning (ERP) software, would acquire a customer relationship management (CRM) software company to round out its product offerings.

While PeopleSoft makes software that automates a company's human resources and financial needs, Vantive makes software companies give to their sales force or use in their call centers. Before today's acquisition, PeopleSoft had kept to a strategy of partnering with companies including Vantive and No. 1 sales software company Siebel Systems.

Today's merger will finally give PeopleSoft its own customer relationship management software to offer customers. Over the past several years, PeopleSoft's larger competitors SAP and Oracle have both developed their own sales and customer service software, and Baan acquired CRM software maker Aurum in 1997 to complete its product line.

PeopleSoft chief executive Craig Conway will head the combined company, which will keep the PeopleSoft name.

Today's deal did little to move PeopleSoft's stock, which was trading at $16.62, down 0.62 in afternoon trading. Vantive's stock, however, rose to $12.19 a share, up $3.25.

The companies said they will maintain both PeopleSoft's headquarters in Pleasanton, California, and Vantive's headquarters in Santa Clara, California. The role of Vantive's chief executive Tom Thomas has not yet been determined.

Under terms of the deal, each share of Vantive common stock will be exchanged for 0.83 of a share of PeopleSoft common stock. Based upon PeopleSoft's closing stock price of 17.25 last Friday, each Vantive share would be valued at 14.23 and the combined value of the transaction is approximately 433 million, both companies said.

Rob Kugel, a financial analyst at FAC/Equities, said the merger between the two companies is a good fit.

"PeopleSoft has needed to add a CRM component to their product line," said Kugel. "The issue of time-to-market is paramount these days. They certainly had no other way of acquiring this [front office] capability internally."

But Kugel questioned how crucial a front office strategy is for the ERP software makers today.

"It's not clear how much it has hurt any of these ERP players to not have CRM up until now," said Kugel. "As of today, PeopleSoft hadn't really missed much by lacking a CRM component. I don't think that would have been the case two years from now and that's why it's important for them to make this move today."

Kugel said both companies won't recognize much of a change financially until the end of next year or the beginning of 2001.

Under the deal, PeopleSoft will fully integrate Vantive's software into PeopleSoft's Web-based business applications.

The merger will be a tax-free transaction accounted for as a pooling of interests. The transaction has been approved by the board of directors of each company and is subject to the approval of Vantive's stockholders and customary closing conditions. The merger is expected to close by January 2000, both companies said.

 

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