Oracle prevails in antitrust case
Oracle prevails in antitrust case
Sep 10, 2004: Oracle has been given the green light to proceed with its planned hostile takeover of rival business software maker, after a U.S. federal judge ruled that the acquisition would pose no threat to competition in the market.
The decision by Judge Vaughn Walker to side with Oracle against the U.S. Department of Justice, which opposed the proposed merger, removes a major roadblock to the acquisition, though PeopleSoft's board remain resolutely opposed to the move.
"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 Jeffrey O. Henley. The poison pill of which Henley refers to is PeopleSoft's controversial customer assurance program, which has created more than US$1.5 billion in liabilities for whoever acquires the company.
The ruling will not however bring an end to court proceedings between the pair, with PeopleSoft having already launched a claim for compensatory damages of more than US$1 billion plus punitive damages in the company's lawsuit against Oracle, which is scheduled to go to trial before a jury in Oakland, California, on November 1. PeopleSoft's complaint alleges that Oracle has engaged in unfair business practices, including a deliberate campaign to mislead PeopleSoft's customers and disrupt its business.
Additionally, the DOJ has 60 days to decide whether it will appeal the court's ruling to the Ninth Circuit Court of Appeals, and is said to be considering its options. The review by the European Commission of Oracle's bid is also ongoing.
In a statement, PeopleSoft's board reiterated their view that the offer tabled by Oracle is insufficient.
"The Company stated that PeopleSoft's Board has carefully considered and unanimously rejected each of Oracle's offers, including its current offer of $21.00 per share. On May 25, 2004, the Board concluded that the current offer was inadequate and did not reflect PeopleSoft's real value. The Board received the opinions of Citigroup Global Markets Inc. and Goldman, Sachs & Co. that the $21.00 per share offer was inadequate from a financial point of view."
That will not deter Oracle, which now feels it has the momentum to complete the deal.
Indeed, Oracle CEO Larry Ellison wasted no time in issuing a letter to the PeopleSoft board after the verdict was announced, which stated: "With the removal of the U.S. antitrust issue, and given our commitment to acquire PeopleSoft, we are hopeful a transaction can occur. We look forward to meeting with you at your earliest convenience to discuss our offer."
The delight which Oracle must have felt upon hearing the verdict was tempered slightly with the release of a survey conducted by market research firm Techtel of corporate IT buyers which revealed that one in four of the 765 IT preofessionals polled who had an opinion of Oracle had a low regard for the company, with less than 50 percent of respondents saying they trust Oracle. This compares with a trust rating of IBM of around 80 percent, and Adobe, which had positive perceptions of over 90 percent.
Report author Bill Schaub commented: "The opinion of software companies in general is down, and the attempted acquisition of PeopleSoft has done Oracle no favours.
The report states that the decline in positive opinion of Oracle started around a year ago, so it is likely that it is linked to its takeover attempt of PeopleSoft, which started around 16 months ago.
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