SAP Tops Oracles Retek Bid

SAP's North American subsidiary has increased its tender offer for Retek to $11 per share, and Retek's board is recommending that shareholders accept the bid.

The race is on. SAP AG announced Thursday morning, along with Retek Inc., that SAPs North American subsidiary has increased its tender offer for Retek to $11 per share, besting Oracle Corp.s previous counteroffer by $2 a share.

Reteks board of directors is unanimously recommending to its shareholders that they accept the revised offer from SAP America Inc.—a statement that is essentially a slap in the face to Oracle, which had been courting Retek since October.

"We believe that SAPs offer is a good deal for Retek stockholders, and our board of directors has unanimously recommended that it be accepted," said Retek president and CEO Mary Leestma, in a statement.

In the heat of battle to acquire the much larger software developer PeopleSoft Inc.—a fight Oracle won in December after 18 months of legal wrangling and yo-yoing tender offers—Oracle admittedly dropped the ball on negotiations with Retek. Thats apparently when SAP stepped in.

SAP announced on Feb. 28 its intent to acquire Retek, which develops retail-oriented software, for $8.50 a share or about $496 million in cash. Oracle announced a little more than a week later, on March 8, its counteroffer, which added a $0.50 premium to SAPs initial bid.

/zimages/3/28571.gifClick here to read more about the battle for Retek.

Despite taunting from Oracle CEO Larry Ellison that Oracle was the far better suitor for Retek—the two companies have been partners for over a decade, have a number of common customers and Reteks earlier software is built on Oracle Forms—SAP officials said the acquisition decision was in Reteks hands, leaving the impression that it would wait for the board to decide between the two companies. Until now.

This latest offer from SAP is a 29 percent premium over the companys initial bid, and a 22 percent premium over Oracles offer.

While not a tactic often seen in the software industry, Oracles counteroffer to SAPs is not surprising. With the acquisition of PeopleSoft, Oracle became the No. 2 business applications provider in the world, bested only by SAP. It clearly intends to defend the position. But with a lot of animosity still lingering over the PeopleSoft deal, and an uncertainty as to which way customers will ultimately lean when it comes to choosing a software platform and suite of applications, Oracle has to fight hard to maintain its industry standing against SAP. This applies both horizontally and vertically, which is where Retek comes in; retail is seen as one of those vertical industries with a burgeoning demand for automation software and little in the way of serious vendor competition.

Minneapolis, Minn.-based Retek is largely considered the leader in its industry. The company develops software that enables automation from the point of purchase through the retail supply chain, and supports retailer activities such as merchandise operations management, supply chain management, and merchandise planning and optimization. Retek has over 200 customers and posted annual revenues in 2004 of $174 million.

According to Thursdays statement, SAP America and Retek have signed an amended merger agreement that ups the acquisition price and pumps up the standard contract termination fee from $15 million to $25 million.

Next move: Oracle.

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