Feds Request More Info from Oracle on Merger

As expected, database software specialist Oracle
received a request for additional information from the U.S. Justice
Department on its intent to merge with applications vendor PeopleSoft
for $6.3 billion.

The DOJ made the request Monday afternoon in a move that had been widely
anticipated by legal experts who felt that Oracle’s hostile bid to purchase
a top competitor in the enterprise applications space could raise enough
concerns about possible antitrust violations.

“As expected, Oracle today received a second request,” said Oracle spokesman
Jim Finn. “We were not surprised given the size and scope of the transaction
and the fact that PeopleSoft is also proposing its own transaction, which is
undergoing regulatory review. It is important not to confuse process with outcome.”

“The department is continuing to investigate the proposed merger of Oracle
and PeopleSoft, but it isn’t our policy to comment further,” a DOJ
spokeswoman told internetnews.com.

The move effectively means the battle that pits Pleasanton, Calif.’s PeopleSoft, who is trying to acquire mid-market applications provider J.D. Edwards, against Oracle, who wants to buy PeopleSoft to challenge SAP and stave off Microsoft’s growing power, will be protracted. Oracle has no deadline for forking over that requested information.

Conversely, legal experts widely agreed that if the DOJ or Federal Trade Commission did not ask Redwood Shores, Calif.’s Oracle for more info regarding its intent, that the bid to merge with PeopleSoft would be almost certain.

Finn said the DOJ received the case less than two weeks ago and did not have
enough time to gauge the “highly fragmented enterprise software marketplace
in such a brief time.”

“We remain optimistic that the Department of Justice will conclude that this
transaction is not anti-competitive, and that we will complete the
transaction in a timely manner,” Finn said.

Ken Marlin, managing partner of investment banking firm Marlin & Associates, which specializes in media and tech mergers and acquisitions, said he wasn’t at all surprised by the DOJ’s request.

“Once you skyline something for the DOJ, you can be sure they’ll take a hard look at it,” Marlin told internetnews.com. “One of the reasons for this is that PeopleSoft raised customer interest against the merger by encouraging customers to call the DOJ and express their views. Another action that pointed toward further review was the filing of the antitrust lawsuit by Connecticut.”

Marlin went on to say that he was convinced that after thorough review, the DOJ will come to find that there is no “definition of concentration in this highly-fragmented market that moves this deal into antitrust territory.”

Oracle certainly hopes so. The company Monday continued its barrage of promises to PeopleSoft customers that it will not leave them stranded.

In a public statement, the company reiterated its pledge to not shut down PeopleSoft products, or force customers to migrate to Oracle E-Business Suite applications. It also agreed to provide free module-to-module upgrades for those that do wish to begin using Oracle software.

In a new wrinkle, Oracle promised support for PeopleSoft products for at least
ten years beyond the timeframe to which PeopleSoft has committed to customers.

“We are determined to provide PeopleSoft customers with more responsive and global support than they’ve ever enjoyed,” said Charles E. Phillips, executive vice president, Oracle Corporation. “PeopleSoft products will be enhanced and supported and Oracle will protect and improve the substantial investment PeopleSoft customers have already made. We have a long history of stellar customer support via the largest enterprise software support team in the industry. We stand by our record and intend to go directly to the PeopleSoft customers to set that record straight.”

Those pledges are part of Oracle’s softened stance since offering to acquire PeopleSoft June 6 for $5.1 billion at $16 per share. Oracle would later up its bid to $19.50, equivalent to $6.3 billion, as well as exchange lawsuits with PeopleSoft.

The case has been quiet in the last week or so, as the companies were awaiting word from the DOJ, although Oracle has continued its steady beat of casting its bid in the most positive of lights.

Last week, the firm killed a condition that PeopleSoft not alter its deal to acquire J.D. Edwards despite the fact that PeopleSoft had already increased its offer for the Denver outfot from $1.7 billion to $1.75 billion.

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