Oracle Corp. faces mounting obstacles in its bid for enterprise application software rival PeopleSoft Inc. as more agencies look into the proposed hostile takeover and as PeopleSoft ratchets up its legal defense.
Canadas Competition Bureau has launched antitrust investigations that come on the heels of the U.S. Department of Justices continuing inquiry and an effort by 30 states to contact customers and industry analysts.
The European Commission, a regulatory body for the European Union, is also studying the proposed deal, Oracle officials confirmed. Like the other agencies, Canadas Competition Bureau is examining, among other things, market share and competition of the two companies; barriers to market entry, including economic or regulatory barriers; competitive products; and whatever competition will remain after a successful merger. Interviewing customers will be a major part of the reviews.
Robert Lancop, assistant deputy commissioner in the bureaus mergers branch, said his departments review is standard operating procedure when a proposed merger involves large companies.
PeopleSoft last week amended a previously filed lawsuit against Oracle, saying the Redwood Shores, Calif., company is interfering with PeopleSoft customers. Citing inside information demonstrating dirty play on Oracles part, the amended suit alleges extensive new facts pertaining to “Oracle managements ongoing acts of unfair trade practices, including its efforts to disrupt PeopleSofts customer relationships,” according to PeopleSoft officials, in Pleasanton, Calif.
Alluding to information PeopleSoft officials say they culled from internal Oracle documents, the suit claims Oracle unlawfully contacted PeopleSoft customers and “embarked on a campaign of disinformation” to cripple PeopleSofts business and poach its customers.
The complaint also asserts that Oracle never intended to purchase PeopleSoft.
“Oracles first salvo in this war game was to announce that it planned to make a lowball, cash offer of $16 per share for all of PeopleSofts outstanding stock,” reads the complaint, filed in Alameda County, Calif. “Oracle knew the $16 price was artificially low, but in its CEOs words, decided to give it a whirl.”
PeopleSofts reasoning is that while Oracle said its tender offer was unconditional, the documents it filed with the Securities and Exchange Commission state, “Oracle will be under no obligation to purchase a single tendered PeopleSoft share should it determine, among other things, that the value of PeopleSofts shares have lessened since the original offer.”
An Oracle spokesman said the company was not surprised PeopleSoft amended its suit, but that did not change Oracles commitment to buy the company.
The amended suit combines PeopleSofts legal actions with those of J.D. Edwards & Co., which PeopleSoft has acquired.
The DoJs Latest Moves
At the same time, the DoJ acknowledged it is continuing its investigation into Oracles bid by contacting customers. A J.D. Edwards customer, Mitch Myers, vice president of operations at FW Murphy Industries Inc., spent an hour talking with the DoJ.
“I basically said that if there was a merger, [the one between PeopleSoft and J.D. Edwards] was the most logical,” said Myers, in Tulsa, Okla. “If we had our druthers, we would prefer to keep them separate. However, if there is a consolidation, this would be the least negative change.
“On the opposite end of the spectrum, we feel pretty strongly that the Oracle attempt could have a negative impact on our business and on the market in general,” said Myers.
Ola Faucher, president of the Higher Education User Group, which represents 650 universities that use PeopleSoft software, said she has not been contacted by the DoJ or states attorneys general but has been contacted by members.
“We are appalled by the expense such a takeover could cost the higher-education community,” said Faucher, in Lawrence, Kan. “About 82 percent of our communities are public institutions funded by state resources. That would be an undue ripple effect and a burden to switch over [from PeopleSoft to Oracle].”
Additional reporting by Lisa Vaas