PeopleSoft Inc. said on Monday it would buy rival J.D. Edwards & Co. for $1.7 billion in stock, creating the second largest business software company. The deal brings together PeopleSoft, which is best known for its software that stitches a company's human resources operations together with other business departments and J.D. Edwards, which focuses on manufacturing shop floor integration software.

The combination, which will compete with Germany's SAP AG and Oracle Corp., comes against the backdrop of weaker corporate spending on technology, which has chilled the market for most business software makers.

Shareholders will get 0.86 PeopleSoft share, or $14.10 for each J.D. Edwards share, a 19 percent premium over J.D. Edwards' closing price of $11.81 in Friday's trading on Nasdaq.

The terms of the deal, which is expected to close late in the third or early in the fourth quarter, call for Denver-based J.D. Edwards to become a wholly owned subsidiary of PeopleSoft. J.D. Edwards shareholders will own 25 percent of the combined company.

Pleasanton, California-based PeopleSoft said the deal would increase its 2004 earnings, excluding amortization and other items. The deal has been unanimously approved by both companies' board of directors.

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