The long wait for a decision is over. And Oracle Corp has prevailed. For the moment at least.
Judge Vaughn Walker, presiding over the U.S. District Court, Northern District of Calif., handed down his ruling in the U.S. Department of Justices case to block Oracles hostile takeover of PeopleSoft Inc., according to court records released late Thursday.
The DOJ argued in its case that Oracles hostile buyout of PeopleSoft would sharply reduce competition in the ERP (enterprise resource planning) software market to the point where it could illegally control prices. Oracle argued that the tier-one ERP software market was much broader than the Justice Departments definition: comprised only of Oracle, PeopleSoft and SAP AG.
Citing issues with the Justice Departments depiction of the software market, Judge Walker denied its request for a federal injunction to block the deal.
“Plaintiffs failed to show ERP vendors distinguish midmarket customers from large customers on the amount of money spent in an ERP purchase. Yet … this was the basis on which plaintiffs attempted to quantify the ERP market,” reads Judge Walkers ruling.
R. Hewitt Pate, assistant attorney general in charge of the Justice Departments antitrust division said in a statement that it is “considering its options.”
“We are disappointed in the Courts decision. We believe the facts and evidence in this case support our position that Oracles proposed acquisition of PeopleSoft would result in a substantial lessening of competition in the markets for high function human resources management and financial management systems software,” said Washington D.C.-based Pate, in the statement.
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While the decision removes a big roadblock to the acquisition, proposed last summer, it does not mean the deal is done. Oracle still has a number of challenges to meet: it must face down PeopleSofts board of directors, who are unanimously against the deal; have PeopleSofts poison pill anti-takeover measure removed in court from PeopleSofts bylaws; and convince PeopleSoft shareholders to tender the majority of their shares to Oracle.
In addition, there is a ruling from the European Commission hanging in the balance.
Shortly after the Judges ruling was announced, Oracle publicly released a letter it sent to PeopleSofts board of directors, requesting the board reconsider its previous recommendations to reject Oracles offer. It also extended its offer for the eleventh time, to midnight on Sept. 24. Its previous tender offer was set to expire today.
Oracles civil trial to stop PeopleSofts poison pill measure is scheduled to begin trial Sept. 27 in the Delaware Chancery Court. The so-called poison pill could reward some PeopleSoft customers between two and five times their license fees if Oracle stops support within a specified time frame, of PeopleSoft applications.
PeopleSoft too has an upcoming civil trial to have Oracles tender offer lawfully removed on the grounds that it is harmful to PeopleSofts business. The company is seeking $1 billion plus punitive damages from Oracle. That trial is set to begin on Nov. 1 in Oakland, Calif.,.
In a statement released following the Thursday decision, PeopleSoft said its board of directors will review the Courts ruling carefully. It noted that the Justice Department “has 60 days to decide whether it will appeal the Courts ruling to the Ninth Circuit Court of Appeals and that the review by the European Commission of Oracles bid is ongoing.”
Meanwhile, the European Commission is awaiting additional information from Oracle before it makes its decision. If it determines that the deal would be anticompetitive, a combined Oracle and PeopleSoft would be barred from doing business in Europe.
With so much hanging in the balance, some customers showed that “fatigue” may have set in over the case, voicing little concern about the final outcome.
William Kragh, vice president of the financial control group at Chicago-based Harris Trust and Savings Bank, and a PeopleSoft Financials customer, said hed have to withhold judgment on the DOJs ruling until he learned more about what it meant.
“You really have to wonder what [Larry Ellison] wants with [PeopleSoft],” he said. “Its been more than a year now. Its gone on for so long.”
Despite the remaining hurdles, Redwood Shores, Calif.-based Oracle remains upbeat.
“This decision puts the onus squarely on the board of PeopleSoft to meet with us and to redeem their poison pill so that the shareholders can accept our offer,” said Oracle chairman Jeff Henley, in a statement.
Oracles offer for PeopleSoft stands at $21 per share.
A PeopleSoft representative was unavailable for comment.
Editors Note: This story was updated to include information and comments from Oracle and DOJ representatives as well as customers.
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