Oracle Corp. has scored a victory in its campaign to buy PeopleSoft Inc., after a US Judge rejected government attempts to block the deal on the grounds it threatens competition and choice.
San Francisco, California, District Judge Vaughn Walker yesterday delivered a 164-page decision against the Department of Justice (DoJ), which had contested in its legal case that Oracle’s proposed $7.7 billion PeopleSoft acquisition would hurt customers.
The focus for legal action in is now expected to shift eastwards, as Oracle takes PeopleSoft to court on September 27 in Delaware Chancery Court in order to remove the company’s poison pill – implemented by PeopleSoft to prevent a hostile take-over.
Welcoming the judge’s decision, Oracle said the onus is now squarely on the board of PeopleSoft to meet Oracle and redeem the poison pill, so shareholders can accept Oracle’s offer. Oracle’s revised offer currently stands at $21 per share.
In a statement, PeopleSoft said its board of directors would meet to review the implications of the ruling.
Pressure is, arguably, mounting on PeopleSoft’s board to meet with Oracle, following second quarter results last month that failed to meet guidance. PeopleSoft partly attributed the results to the case itself and to uncertainty surrounding the company’s long-term future brought on by Oracle’s bid.
The results, though, could succeed in convincing wavering shareholders that Oracle’s reading of market conditions is correct. Oracle contends ERP is a saturated market while PeopleSoft is a player whose performance will weaken over the long-term.
Delaware, meanwhile, will likely become the new focus for the battle between the two companies, as the DoJ itself is not expected to appeal Vaughn Walker’s decision. The department has ten days during which it can file an appeal.
Charles Biggio, partner in the New York offices of business and employment law specialist Akin, Gump, Strauss, Hauer and Feld, predicted the DoJ was unlikely to appeal because such a move involved challenging the judge’s findings of fact – something the DoJ has historically been unwilling to undertake in merger cases.
The DoJ could not be contacted at the time of going to press.
Biggio noted Vaughn Walker had apparently accepted Oracle’s view of the US Enterprise Resource Planning (ERP) market, that the market is not dominated by Oracle and SAP AG, while also rejecting testimony supporting the DoJ’s case from customers.
You can’t appeal the judge’s fact finding, Biggio said.