Article

Judge rules in favor of Oracle in takeover case

Ellen O'Brien

A federal judge has sided with Oracle Corp. in a battle over whether the company's attempted acquisition of rival PeopleSoft Inc. would violate antitrust law.

In a 164-page ruling, U.S. District Court Judge Vaughn Walker rejected the U.S. Justice Department's argument that the hostile takeover would severely limit choices for customers of software that automates business functions.

The ruling comes 15 months after Oracle first issued an offer for PeopleSoft, and follows weeks of heated testimony in a high-profile case that had competitors and stockholders on edge.

Pleasanton, Calif.-based PeopleSoft responded with a statement that promised it would "review the implications of today's ruling" and reiterated that its board has previously determined that Oracle's tender offer to shareholders, which currently stands at $21, is too low.

The Department of Justice can appeal the decision. In a statement it said it was "disappointed" and is reviewing its options.

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Oracle moved quickly following the decision, petitioning PeopleSoft to reconsider the offer. It also extended the deadline for PeopleSoft investors, previously set for midnight tomorrow. They now have until Sept. 24 to tender their shares.

"With the removal of the U.S. antitrust issue and given our commitment to acquire PeopleSoft, we are hopeful that a transaction can occur," Oracle's board of directors said in a statement. "In light of recent trends and events, we urge the [PeopleSoft] board to reconsider its previous recommendation. We believe our offer provides full and fair value and that further delay is not in the best interests of PeopleSoft's stockholders, customers and employees."

Prior to the start of the court case, Judge Walker received tutorials in the enterprise software market, viewing videotaped depositions provided by Oracle and the DOJ. During the trial, Walker repeatedly pressed for a clearer definition of the enterprise software market and how the mid-market factors into today's competitive landscape.

Oracle still has significant hurdles to overcome -- with the poison pill, the board vote, the [European Commission] and the current share price.
Lee Geishecker,
Research vice president Gartner Inc.

Walker's ruling highlighted the ability of ERP players such as SAP, Microsoft Corp. and Lawson Software Inc. to compete with a post-merger Oracle.

In summary, the judge wrote: "Because plaintiffs have not shown by a preponderance of the evidence that the merger of Oracle and PeopleSoft is likely substantially to lessen competition in a relevant product and geographic market in violation of [antitrust laws], the court directs the entry of judgment against plaintiffs and in favor of defendant Oracle."

Oracle's tender offer of $21 per share was to expire at midnight tomorrow.

The federal ruling was a victory for Oracle, but the company will face additional obstacles. Those potential challenges include PeopleSoft's so-called poison pill, giving it the ability to dilute Oracle's stake in the company.

"Oracle still has significant hurdles to overcome -- with the poison pill, the board vote, the [European Commission] and the current share price," said Lee Geishecker, research vice president at Gartner Inc.

PeopleSoft is still pursuing separate legal action against Oracle, seeking damages of more than $1billion dollars. The company claims that Oracle engaged in unfair business practices and deliberately misled PeopleSoft customers, disrupting its business. That case is set to begin on Nov. 1.

Before the judge's ruling, PeopleSoft shares closed up 46 cents at $17.97. The stock surged in after-hours trading, however, rising more than 13% to $20.40.


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