26 January 2004 Antitrust regulators in the US are understood to be close to deciding whether to block Oracle’s controversial $7.3 billion bid for enterprise applications rival PeopleSoft.
Sources close to the US Department of Justice say that the DoJ’s antitrust team will make a preliminary recommendation on the deal in the next few days. Some unconfirmed reports suggest that the team is likely to urge the DoJ to block the deal when it makes its final ruling in March 2004.
These reports claim that the DoJ is worried that Oracle would control too much of the enterprise applications sector by acquiring PeopleSoft – creating a virtual duopoly with Germany’s SAP, particularly in the markets for human resources and finance applications.
The separate rulings by the DoJ and by European antitrust investigators in Brussels will end one of the longest merger inquiries of recent years.
While some criticism has been aimed at officials for the time it is taking to complete their inquiries, PeopleSoft CEO Craig Conway has said that he believes that Oracle has obstructed the investigation.
“In our view, Oracle, not the regulators, is working at largo tempo,” said Conway in a letter to the Wall Street Journal, “deliberately dragging its feet in order to inflict harm on PeopleSoft.”
In the letter, Conway alleged that Oracle took longer than was necessary to respond to DoJ requests for information and he questioned why it had taken Oracle more than four months to file its merger offer with the European authorities. He also claimed that the EC’s recent pause in its investigation was caused by Oracle’s refusal to pass important information on to Brussels.
“[Oracle CEO] Larry Ellison’s rhetoric, his low-ball offer and failure to comply with the DoJ and the EC all support our contention that his goal all along has been, in one way or another, to eliminate a competitor,” he said.
One possible sign of the seriousness of Oracle’s intent, however, came on 23 January when Oracle named five possible replacements for PeopleSoft directors whose positions are up for re-election in 2004.
Oracle has consistently maintained that it is sincere about its offer for PeopleSoft and is doing all it can to help with the investigations in the US and Europe. “We are committed to pursuing this transaction and we expected it to take time,” Oracle executive vice president Charles Phillips said in late 2003. “The passage of time doesn’t deter us in any way and was factored into our thinking.”
He added: “We remain absolutely convinced that a stronger combined applications business from Oracle and PeopleSoft is good for competition, good for investors, and good for customers”
PeopleSoft shareholders have until 13 February to vote on the bid, although analysts say that this deadline might be extended until after the DoJ ruling.