Oracle has signed a definitive agreement to acquire PeopleSoft for $26.50 (£13.79) per share, or about $10.3bn.
The transaction has been approved by both companies' boards of directors and is expected to close by early January.
After careful consideration, PeopleSoft's board decided that Oracle's latest offer provides good value for PeopleSoft's stockholders, the company said.
The customers Oracle gains from PeopleSoft will allow it to invest more in applications development and support, Oracle said, repeating an argument the company has been making for the past 18 months as it fought to win support from PeopleSoft's shareholders, executives and customers.
Oracle plans to enhance PeopleSoft 8 and develop a PeopleSoft 9, and enhance JD Edwards' 5 and develop a JD Edwards 6, it said.
The companies had been scheduled to meet later Monday in Delaware Chancery Court to give depositions over PeopleSoft's "poison pill" provision, aimed at blocking a hostile takeover attempt.
The poison pill would have allowed PeopleSoft to significantly inflate its number of outstanding shares in case of a takeover bid, making a buyout prohibitively expensive.
The companies now plan to put their litigation on hold and drop the claims entirely when the merger is complete, PeopleSoft said.
Oracle's purchase offer is subject to a majority of PeopleSoft's fully diluted outstanding shares being tendered in favour of the offer, as well as customary closing conditions.
Oracle announced in November that it had secured the backing of enough PeopleSoft shares to complete the merger. At the close of business on Friday, about 120.6 million shares had been tendered in favour of the offer, Oracle said.
On Monday, PeopleSoft's board recommended the company's shareholders to tender their shares in Oracle's favour.
The news came on the same day Oracle announced its financial results for the quarter just ended, where revenue from Oracle's applications business increased by 57%, Oracle said.
James Niccolai writes for IDG News Service