PeopleSoft Inc has gained the upper hand in its fight against Oracle Corp’s $9.4bn hostile takeover bid following the decision by the US Department of Justice staff to recommend against the move.
Following an extended investigation, DoJ staff lawyers have laid down a preliminary recommendation advising against Oracle’s proposed acquisition of PeopleSoft. It is now up to the Assistant Attorney General to make the final decision, which will be handed down by March 2.
Oracle maintains that the fight is not over yet. The decision on Oracle’s merger will be made by the Assistant Attorney General with the assistance and advice of his staff and deputies. It will take into account not only the recommendation of the investigating staff, which we understand was forwarded to the Assistant Attorney General today, but also facts and arguments presented to senior division decision makers by the merging parties, said James Rill, Oracle’s legal counsel in a statement.
Over the course of my 45 years of antitrust practice I have seen many instances in which the Assistant Attorney General’s decision differed from that recommended by the investigating staff, including several instances during my three years as Assistant Attorney General, said Rill. This process simply is not complete.
If the final decision goes against Oracle, it will have the right to appeal, and although the company has not indicated whether it would, CEO Larry Ellison has previously said it is something he would like to pursue. However, the reality of going up against a government injunction and the amount of time that would have to be devoted to the case could distract from managing the business and might mitigate against this course of action.
Following the news, PeopleSoft’s share price fell 2% to $21.33 in after-sales trading, 18% below Oracle’s $26.00 offer price, indicating that investors think it less likely that the merger will go through. Oracle’s share price increased by less than 1%, to $13.46.
PeopleSoft, which has consistently said that the unwelcome offer would founder on antitrust issues, switched mode last week and focused its anti-merger rhetoric on the assertion that Oracle had undervalued the company even at $26.00 per share.
Oracle, meanwhile, reminded the industry of some of the origins of the dispute. The initial proposal to merge PeopleSoft’s applications business with Oracle’s applications business came from PeopleSoft CEO Craig Conway, who proposed that he was the best person to run the combined companies’ applications business and never mentioned any antitrust concerns, said Oracle spokesperson Jim Finn.
However, when Oracle countered by proposing to buy PeopleSoft, Conway said that he wouldn’t sell at any price. He then began a long and intensive lobbying effort aimed at persuading the Antitrust Division of the US Department of Justice to block the deal. PeopleSoft’s lobbying resulted in complicating and prolonging the Justice Department review of the merger. While no decision has yet been made, Oracle believes this merger will eventually be approved.
This article is based on material originally published by ComputerWire