Retek Inc. formally endorsed Oracle's $670 million bid, signing a merger agreement on Monday that could result in integrating the company's retail software with the Oracle E-Business Suite.
Last week, Oracle bid $11.25 a share, compared with a March 8 offer of $9, well above SAP's $11-a-share or about $600 million offer for Retek.
SAP indicated in a prepared statement that its bid was its best and final offer for Retek and it has dropped out of any further bidding.
"The retail industry remains strategically important to SAP," said Henning Kagermann, SAP's chief executive, in a prepared statement. "As a disciplined investor, SAP established a premium price for this niche business. However, we concluded that neither our shareholders nor retail customers would benefit from an auction process that would further inflate the purchase price, and in the long run, not deliver the returns we demand."
The acquisition of Minneapolis-based Retek is more important for Oracle, which doesn't have a retail specific product, said Michael Dominy, a senior analyst with Boston-based Yankee Group.
Oracle's strategy had been to partner with Retek, while SAP built an industry-specific offering for retailers.
A successful acquisition of Retek gives Oracle an advantage over SAP in the North American retail industry, Dominy said. While SAP has a retail-specific offering, it has struggled to gain a foothold in the North American market.
"Retek is a company that was solely focused on the retail industry and has functionality that specifically tailored in that industry," Dominy said. "SAP has to spread its research and development over five or six different categories, so by its very nature SAP has a challenge in developing deep functionality in retail."
A surge in IT spending in the retail industry has made it attractive to SAP and Oracle in recent years. Retailers have been scrapping outdated legacy systems and in many cases, replacing them with best-of-breed products.
Oracle said it would begin merging Retek over the next several weeks. Retek has about 525 employees at offices in Atlanta, London and Melbourne, Australia.
"Oracle has the largest applications business in North America, and we intend to expand that leadership position," said Oracle CEO Larry Ellison in a statement. "Combining Oracle with Retek is an important step in that direction, and it strengthens our position in the retail applications market globally."
Retek's products have been developed on Oracle's technology platform using Oracle's development tools. Oracle estimates that 80% of Retek's customers currently run Oracle's infrastructure software.
"We will work with Oracle over the next several weeks to ensure that the integration is not disruptive for our clients and employees," said Marty Leestma, president and CEO of Retek.