Shortly after the U.S. Department of Justice announced this afternoon that it will seek to block Oracle Corp.s $9.4 billion hostile takeover bid of PeopleSoft, Texas State Attorney General Greg Abbot said he and six other state attorneys general will join the Justice Department.
The attorneys general from Hawaii, Maryland, Massachusetts, Minnesota, New York and North Dakota are also joining the suit.
The DOJ is filing a civil antitrust suit against Oracle today in San Francisco—a middle ground for Oracle, based in Redwood Shores, Calif., and PeopleSoft in Pleasanton, Calif.
R. Hewette Pate, the assistant attorney general charged with making the call to block the deal or not, said that if the merger is allowed to go through it will eliminate competition in an important market.
“If allowed to go forward, major business and government agencies that depend on human resources and financial software would pay higher prices, have fewer choices and less innovation,” said Pate, in Washington. during a press conference this afternoon. “Oracle and PeopleSoft and only one other company [SAP AG] provide services that I mentioned. Under any analysis this is an anti-competitive deal.”
Oracle has charged in the past that the DOJ has been unduly affected by PeopleSofts lobbying efforts, and stuck to that defense today.
“The Department of Justice decision follows an aggressive lobbying campaign by PeopleSoft management,” said Oracle spokesman Jim Finn. “It is inconsistent with the overwhelming evidence of intense competition in the market we serve, and we believe it is without basis in fact or in law.”
The DOJs Pate said his staff took into consideration a “large number of important customers opinions in making the decision—including current customers, potential customers and those counting on maintenance and upgrades.”
The DOJ also took into consideration potential competition from Microsoft Corp.—a company that Oracle pointed to frequently as providing competition outside of SAP, Oracle and PeopleSoft.
“We looked at Microsoft and other firms, and we concluded there wasnt going to be entry [into the market] in a timeframe that changed the anti-competitive nature of this deal,” said Pate. “We think its simple common sense that this merger would be bad for competition. To say otherwise would be to take something simple and try to turn it into something complicated.”
Despite the DOJs decision to try to block the deal, PeopleSoft is not out of the woods yet.
A March 25 shareholders meeting will determine shareholders view of the deal—and potentially put Oracles slate of nominees at the helm. Oracle has nominated five board members to PeopleSofts eight-member board—its working to change PeopleSofts bylaws to include a ninth member. At the same time, PeopleSoft has nominated four of its board members for re-election.
Craig Conway, PeopleSofts president and CEO, said its time for both companies to get back to business as usual.
“Now that the antitrust day of reckoning has arrived and the Justice Department has announced its decision to sue to block the transaction, it is time for Oracle to abandon its efforts to acquire the [c]ompany. Both companies should now devote all their energy to competing in the marketplace,” Conway said in a statement.
That may not be the course of action Oracle takes. At this point the company could decide one of three options: to abandon its bid for PeopleSoft and walk away; to fight the DOJ in court; or to seek a settlement.
The latter is the least likely, according to experts close to the deal.