27 February 2004 The US Department of Justice (DoJ) has filed suit to block Oracle’s $9.4 billion hostile takeover bid for rival PeopleSoft, a decision that Oracle has threatened to contest in the law courts.
The DoJ, which was joined by seven states in opposing the deal, stated that if the merger were allowed to go ahead, it would reduce competition in the high-end business software market, which is dominated by Oracle, PeopleSoft and SAP. This would result in higher prices, less innovation and less choice for customers, the department warned.
“We believe this transaction is anticompetitive — pure and simple,” said Hewitt Pate, assistant attorney general in charge of antitrust. “Blocking this deal protects competition [and] that benefits major businesses, as well as government agencies.”
Oracle vowed in a press release to “vigorously challenge” the DoJ’s decision, claiming that the department’s definition of the market with only three suppliers that meet the needs of large enterprises “does not fit with reality”. “We believe that the government’s case is without basis in at or law, and we look forward to proving this in court,” said Oracle spokesperson Jim Finn.
However, Pate, who took over the antitrust division last year, said that the department’s decision was based on traditional merger analysis. “We did not need to make use of unusual theory in order to bring this lawsuit to block this merger,” he said.
PeopleSoft CEO Craig Conway described the DoJ’s decision as a vindication of the PeopleSoft board’s position.
“It is time for Oracle to abandon its efforts to acquire the company,” said Conway. “Both companies should now devote all of their energy to competing in the marketplace to provide better products and services for customers.”
Oracle has raised its offer for PeopleSoft three times since last June and had nominated its own slate of candidates for PeopleSoft’s board elections, due in March. However, Oracle has backed down, saying in a statement that it was “withdrawing the slate of independent directors and will not be soliciting proxies for the meeting”.
Legal experts have said that any court battle will likely be short lived.