17 November 2003 European anti-trust regulators in Brussels have extended their investigation into Oracle’s $7.3 billion hostile takeover bid for PeopleSoft, a move that could delay a final ruling on the combination until mid-March.
After a month-long preliminary analysis, the European Commission (EC) said yesterday that it had decided the case warranted a ‘second-phase’ investigation in which it would look at “the impact of the transaction on the markets for business applications software used by large multinational companies.”
Highlighting the intense competition between Oracle, PeopleSoft and Germany’s SAP at the top of the business applications market, the EC said it wanted to analyse the prospect of the number of key players being reduced from three to two, especially in certain applications markets.
Brussels also said it would investigate any potential effects in the relational database market where Oracle is a dominant force alongside IBM and Microsoft.
For its part, Oracle will no doubt point to the scores of smaller business applications vendors that exist in Europe – names such as Scala, IFS, Cedar, Sage, Exact, Agresso and IBS. It will also highlight SAP’s much larger market share and the recent entry of Microsoft into the market through its acquisition of Denmark’s Navision.
On the other hand, lobbyists for PeopleSoft and SAP are likely to argue that such vendors only really challenge the top tier applications vendors in certain vertical markets.
Saying it now has four months to make a final ruling, the Commission stressed that its decision to open an in-depth inquiry “does not pre-judge the final result of the investigation”.
Although such proposed deals are rarely halted, there are some precedents involving the merger of two US multinationals – most notably in 2001, when General Electric was forced to abandon its proposed acquisition of Honeywell.
The US Justice Department, which is also looking into the Oracle/PeopleSoft deal, is expected to deliver its ruling in late November or December.
Even if it gets the go ahead, the deal could still take a full year from start to finish. Oracle launched its hostile bid for PeopleSoft in June 2003, shortly after PeopleSoft announced an agreement to merger with rival JD Edwards – a transaction that has since been completed.
Responding to the Commission’s move, an Oracle spokesman said that the company was “in this for the long-haul” while PeopleSoft reiterated its position that “the proposed combination [faced] a significant likelihood that it would be prohibited”.