The bidding war for retail software developer Retek Inc. is heating up, with Oracle Corp. lobbing its second counteroffer against SAP AGs second acquisition bid.
Oracle said after the close of the market Thursday night that it would best SAPs $11-per-share offer for Retek—announced earlier in the day on Thursday—by a quarter, increasing its offer to $11.25 a share, or $630 million.
About the same time Oracle made its Retek announcement, it also quietly released a statement that Chief Financial Officer Harry You resigned after only eight months on the job. Co-president Safra Catz, who led the financial analysis of Oracles embattled acquisition of PeopleSoft Inc., will act as interim CFO.
SAP made its initial $8.50 per-share-bid for Retek on Feb. 28; Oracle countered that nearly a week later with a $9-per-share offer. At the same time, the company announced it had amassed nearly 10 percent of Reteks shares, or about 5.5 million shares—a point that could turn out to be a linchpin for Oracle. If it decides to acquire more than 10 percent of Reteks stock, Oracle would be required to start a tender process and could potentially trigger a proxy battle with Retek.
At the same time, SAP would need to acquire Oracles shares to complete a Retek acquisition.
While Retek is a relatively small deal for both companies—in comparison, Oracle paid $10 billion for PeopleSoft in December—it is a significant buy in several respects. Retek, based in Minneapolis, Minn., is the leader in the burgeoning retail software sector; the deal would enable each company to expand vertical industry expertise in an underserved market. With Retek a long-established partner of IBM—an Oracle nemesis in the database world—acquiring Retek would mean not only taking it from SAP, but from IBM as well.
At the same time, the bidding war for Retek is also the first public battle between the two software giants as they work to mark their territories in the business applications space. SAP is the undisputed leader in the global ERP (enterprise resource planning) market. Oracle, buffeted by the PeopleSoft acquisition, is second but vying for first.
"Our North American applications business is larger than SAPs. We intend to defend our number one position," said Oracle CEO Larry Ellison in a statement. "Customers have told us they want Oracle to buy Retek. Reteks applications are built on Oracles technology platform. And Retek and Oracle share a vision of applications built using industry standards like Java, not proprietary programming languages like SAPs ABAP."
The technology argument is only partially accurate. While most of Reteks early applications are built on Oracles technology platform using Oracle Forms, the companys latest suite, Retek XI, was rearchitected and based on open forms and Java. SAP does use a proprietary programming language, referred to as ABAP, but several years ago the company opened its application server to encompass Java as well, enabling programmers to develop newer SAP applications in either ABAP or Java.
IT analyst firm Piper Jaffray & Co. questions Oracles ability to do strategic acquisitions more than its ability to easily absorb a platform.
"Where will the bidding end? Clearly [Oracle] has enough cash, at $9.1 billion on Feb. 28; however, we would like to see the company roll out a strategic vision for its applications business that explains how it will retain and develop its newly acquired PeopleSoft customer base," said Tad Piper, senior analyst at Piper Jaffray, in a research note. "To look at it another way: this equates to more than $3 million in acquisition cost per Reteks roughly 200 customers, clearly lengthening the potential payback period."
Last year Retek posted annual license revenues of $43 million, and overall revenues of $174 million.