EU Clears Oracle for PeopleSoft Takeover

Michael Singer

Updated · Oct 26, 2004

UPDATED: European Union regulators will not obstruct Oracle’s hostile
takeover bid
for PeopleSoft, officials said Tuesday.

After a lengthy probe, the European Commission (EC) said there was
not enough evidence to suggest that competition would suffer under the
current $7.7 billion offer to merge the two companies. The commission
said the enterprise software market segment has other players with multinational activities beside Oracle, PeopleSoft and market leader SAP AG , the three most visible players.

The ruling is one more helpful indicator in Oracle’s quest to acquire its rival. Recently, a federal judge ruled against the U.S. Department of Justice’s antitrust case against the merger.

Unlike the DoJ’s argument, however, the EC said it realized that that there
are separate markets for “high-function” financial planning and
reporting (FMS) and human resources processes (HR) software. The
commission also established that the markets are worldwide in scope.

“The commission reached this conclusion after analyzing hundreds of
HR and FMS bids launched by large and complex enterprises over the last
couple of years,” the EC said in a statement. “The commission also
carried out various econometric tests with this data, which revealed
that Oracle’s bidding behavior was not particularly affected by the
specific identity of the rival bidders in the final rounds of a given
bidding contest, i.e. the presence of PeopleSoft or SAP as rival did not
necessarily give rise to more aggressive discounting compared to
Oracle’s behavior vis-a-vis other bidders.”

In its ruling, the EC identified vendors such as Lawson, IFS,
Intentia and QAD as other large-class competitors that could hold their
own in a competitive bidding war. Regulators were also quick to point
out that they see Microsoft as “a competition
constraint” in the mid-market that only managed occasionally to win bids
in the “enterprise” space.

Yankee Group analyst Mike Dominy told internetnews.com the
EC’s conclusion should come as no surprise but that Oracle’s next step
toward PeopleSoft is much more important development to watch.

“Now Oracle needs to offer an attractive price and devise an
effective customer management program,” Dominy said. “Oracle will
naturally want to neutralize PeopleSoft’s CAP before finalizing a deal
to acquire PeopleSoft. I am sure teams negotiating the deal came
identify a way to remove the CAP as a inhibitor to executing the deal.”

Since June 2003, the EC had started and stopped its query several
times while it waited for Oracle to deliver key documents. European
officials had hinted that they wanted to wait until the U.S. courts had
enough time to sort through their own antitrust issues.

Representatives with Oracle were not immediately available to comment
on the EC’s ruling. Last week, Oracle extended its tender offer for all
of the outstanding stock of PeopleSoft until Friday, Nov. 5.

PeopleSoft issued a statement that “its Board of Directors will
review in due course the implications of today’s decision.” The
Pleasanton, Calif.-based firm has historically opposed the terms of
acquisition, saying that $21 per share is less than it hoped
considering it reported $699 million in total revenue for its third
quarter. Shares of PeopleSoft closed at $20.09 Tuesday.

Even though the EC has approved the offer, Oracle execs still face a
gamut of other obstacles, including a shareholders’ vote and the usual
regulatory approval process before the merger is official.

The thing that Oracle needs to do is to build a leadership team to
take the product lines and give SAP a run for its money,” Joshua
Greenbaum, a principal with Enterprise Applications Consulting, a
technology and marketing consultancy, told internetnews.com.

“Oracle has been too focused on the art of the deal and not on the art
of the enterprise product. They need a clear direction to recover some
of the lost ground as a result of this year and a half long battle. At
the end of the day, Oracle and PeopleSoft are battered companies and all
of that effort by [Oracle CEO Larry] Ellison will be for naught unless
they can define how new innovation can come from Oracle. I don’t think
it is impossible. PeopleSoft did it with J.D. Edwards.”

In his recent commentary entitled The Beginning of the End of PeopleSoft, Greenbaum said he thought the recent departure of Craig Conway as CEO was a clear sign that PeopleSoft was ready to move on.

Oracle is also awaiting a ruling in its recent trial to remove so-called “poison pills” like its Customer Assurance Program (CAP) from PeopleSoft’s charter.

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  • Michael Singer
    Michael Singer

    Michael Singer is a career coach, podcast host, and author to help you step into a career you're excited about. Currently, He is a coach and trainer helping entrepreneurs and executives achieve business and leadership success. He is also an award-winning business journalist focused on the intersection of technology, Big Data, Cloud, SaaS, SAP, and other trending technology.

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