M&A

Oracle Wins Key Ruling Over PeopleSoft

Judge’s decision could touch off a flurry of mergers in the global business software market, analysts say.
Stephen TaubSeptember 13, 2004

Fifteen months after making its initial overture, Oracle Corp. won a key legal decision that paves the way for it to continuing pursuing its $7.7 billion unsolicited takeover of PeopleSoft, Inc.

U.S. District Court Judge Vaughn Walker ruled last Thursday that the merger would not hurt competition in the software industry, thus rejecting the premise of a Justice Department’s antitrust lawsuit that tried to block the deal, according to published reports.

The decision, in the U.S District Court for the Northern District of California, stunned investors, who bid up PeopleSoft’s shares by around 11 percent.

If Oracle completes a merger with PeopleSoft, it would become the world’s second largest maker of business applications software, trailing only Germany’s SAP AG, according to Bloomberg.

The Judge’s ruling could have widespread implications. For one thing, it could touch off a global flurry of mergers and acquisitions among makers of different kinds of business-oriented software analysts told Reuters.

What’s more, it could further spur the recently recovering overall M&A market if investment bankers and potential partners perceive a more accommodative environment for large mergers.

To be sure, the deal is by no means done. PeopleSoft’s shareholders, for instance, must approve it. PeopleSoft’s Board has unanimously rejected each of Oracle’s previous offers, including its current offer of $21 per share. On May 25, 2004, the Board concluded that offer was inadequate and did not reflect PeopleSoft’s real value.

Oracle also still needs approval from the European Commission, which in recent years has taken a narrower approach to its definition of market concentration.

Further, the US said it is considering an appeal of Walker’s ruling to the 9th U.S. Circuit Court of Appeals, according to Bloomberg. The government had argued that if Oracle and PeopleSoft were permitted to merge, Oracle would have an easier time raising prices and blunting competition.

Judge Walker, however, apparently agreed with Oracle that there are enough competitors in the business-software market.

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