PeopleSoft Incorporated capitulated to Oracle Corporation, accepting a sweetened $10.3 billion offer to end an 18-month battle that pitted PeopleSoft against its shareholders and led to the ouster of its chief executive.

Oracle’s chief executive, Larry Ellison, raised his offer by 10% to $26.50 a share from $24. The combination creates the no. 2 provider of business applications software behind Germany’s SAP AG.

“Everybody comes away with something, and shareholders more than anybody should be celebrating,” said Steven Cohen, chief investment officer at Kellner DiLeo Cohen & Co., a New York-based firm that owned 720,400 PeopleSoft shares as of September 30.

The agreement ends a fight that sparked three court cases, cost People-Soft’s chief executive, Craig Conway, his job and took more than $1 billion in sales from PeopleSoft. The deal, announced yesterday, also halts a court case in Delaware, where Oracle was seeking to have PeopleSoft’s takeover defenses struck down. Oracle’s win in a tender offer last month gave Oracle momentum in the trial.

“This has been a long, emotional struggle,” a PeopleSoft director, George Battle, said in a statement yesterday. The sale was been approved by both boards and will close December 31,according to Oracle. The transaction will add 1 cent a share to Redwood City, Calif.-based Oracle’s earnings in the fourth quarter.

Shares of Pleasanton, Calif.-based PeopleSoft rose $2.48, or 10%, to $26.43 in Nasdaq Stock Market composite trading. Oracle rose $1.35, or 10%, to $14.63.

The transaction creates a company with more than 22,750 customers and more than 53,800 employees, and it lessens Oracle’s reliance on the database software that provides 80% of revenue. The combination vaults Oracle to no. 2 from no. 3 in the $22 billion market for programs that handle tasks such as payroll and human resources.

“It’s not just that I wanted to win for the sake of winning,” Mr. Ellison, 60, said on a conference call with reporters. “If Oracle is going to be a strong applications competitor, we had to be bigger.”

In his road to victory, Mr. Ellison fought and beat the American Justice Department, which sued to stop the bid, claiming it would reduce competition. Oracle persuaded European Union officials to approve the offer in October and convinced 61% of PeopleSoft holders to tender their shares last month.

PeopleSoft “floated a trial balloon” last Thursday, Mr. Ellison said in an interview, and directors indicated they would be willing to discuss a bid of $26.50. Mr. Ellison raised his “best and final offer” after PeopleSoft handed over documents that showed the company is more profitable than Oracle had assumed, he said on the call.

The transaction was sealed at about 11 p.m. New York time, Mr. Ellison said.

PeopleSoft had rejected all five of Oracle’s bids since the first offer in June last year. The bidding began at $16 and reached $26 in February before Oracle reduced its offer, citing PeopleSoft’s falling share price. Mr. Conway, a former Oracle employee, fought the bid until he was ousted in October for misleading investors. He characterized Mr. Ellison as “sociopathic” and said he wouldn’t sell the company at any price.

PeopleSoft had pressed for more money and said it’s worth more than $31 a share to Oracle, based on calculations by the company’s directors that were distributed to investors last week.

Founder David Duffield, who returned as CEO October 1 after Mr. Conway was fired, said he was “deeply saddened” that Oracle’s takeover succeeded. Bloomberg News obtained a copy of a letter he wrote to employees and confirmed the contents with a PeopleSoft spokesman, Steve Swasey.

“I offer my sincere apologies for not figuring out a different conclusion to our 18-month saga,” Mr. Duffield wrote. “It became clear to us that the vast majority of our stockholders would accept $26.50 and that Oracle was willing to pay it.”

Jobs will be cut at both companies, Mr. Ellison said, declining to elaborate.

Oracle said yesterday that second quarter profit rose 32% to $815 million, or 16 cents a share, from $617 million, or 12 cents, a year earlier. Sales rose 10% to $2.76 billion in the quarter ended November 30 from $2.5 billion.

Analysts expected revenue of $2.6 billion and profit of 14 cents a share, the average estimates of 29 analysts in a Thomson Financial survey.

Oracle expects sales to rise as much as 11% to $2.9 billion this quarter, the chief financial officer, Harry You, said on the call yesterday. Software license revenue will grow 9%, he said. Earnings will be 14 cents to 15 cents a share.

“This is acquiring growth,” said a Garban Institutional Equities analyst in Jersey City, N.J., Rich Williams. “In a software industry that’s struggling for any kind of growth at all, it seems this is the only path that most of the larger companies can take for the moment.”

Arguments were scheduled to be heard this morning in the “poison pill” case in Delaware Chancery Court. PeopleSoft directors might have capitulated because they expected to lose, Mr. Cohen said.

“They were very fearful about how the judge was going to rule,” Mr. Cohen said. Judge Leo Strine Jr. called the settlement “a happy result” in a hearing in Wilmington yesterday.

Oracle promised to update People-Soft’s applications for 10 years, and Mr. Ellison said he will create a “successor” product that will combine features from each. That product won’t be out for 30 months to 36 months, Mr. Ellison said on yesterday’s call.

SAP controls 39% of the market for business application software. Oracle and PeopleSoft together have 25%.