Oracle Corp yesterday said it will see the US Department of Justice and seven states’ attorneys general in court, deciding to challenge the DoJ’s ruling that its proposed acquisition of PeopleSoft Inc would break competition law.
Oracle’s spokesperson on the ongoing hostilities, Jim Finn, said: We believe that the government’s case is without basis in fact or in law, and we look forward to proving this in court.
The move means that Oracle is withdrawing from the proxy contest it was taking to PeopleSoft’s shareholder meeting on March 25. It will not try to take over PeopleSoft’s board as planned.
It has also extended its $26-per-share offer from March 12 to June 25. As of close of business yesterday, Oracle only had the support of 5,294,574 PeopleSoft shares, about one and a half percent of the total.
We believe this transaction is anticompetitive-pure and simple, Hewitt Pate, head of the DoJ’s antitrust unit, said in a statement. Under any traditional merger analysis this deal substantially lessens competition in an important market
The DoJ said it believes that if Oracle and PeopleSoft were to merge, only SAP AG would remain as a competing provider of high-end business software, such as human resources and financial applications.
The Department’s claim that there are only three vendors that meet the needs of large enterprises does not fit with the reality of the highly competitive, dynamic and rapidly changing market, Oracle said in a statement.
The attorneys general of Hawaii, Maryland, Massachusetts, Minnesota, New York, North Dakota, and Texas are all joining the lawsuit. The state of Connecticut, a big PeopleSoft customer, is already suing to stop the merger on similar grounds.
PeopleSoft CEO Craig Conway said that it was Oracle’s day of reckoning and called on the company to drop its offer so that both firms can devote all of their energy to competing in the marketplace.
Oracle shot back that the DoJ was influenced by heavy PeopleSoft lobbying. Critics of PeopleSoft have said the firm should have focused more on trying to extract a better price from Oracle than on persuading regulators the deal would be anticompetitive.
Even if Oracle were to fight off the DoJ, it would still also have to win over PeopleSoft’s shareholders with its offer, as well as remove a number of poison pill takeover countermeasures that PeopleSoft has installed.
The American Shareholders Association, a lobby group that advocates for what it calls the worker-capitalist, said it had not found any antitrust problems in its analysis of the proposed merger, and criticized the DoJ’s move.
The Department is setting new precedent to intervene in market based transactions and making it much more difficult for companies to merge, the ASA said in a statement. This will result in a devaluing of all publicly traded companies and shareholder wealth.
This article is based on material originally published by ComputerWire