11 February 2004 The US Department of Justice’s antitrust division has recommended that Oracle’s hostile takeover bid for rival PeopleSoft be blocked on antitrust grounds.
The news will boost PeopleSoft CEO Craig Conway’s campaign to stop the takeover. He has been banking on such a recommendation and continues to claim that there is a “significant likelihood” that the proposed deal will be blocked by regulators in both the US and Europe.
Nevertheless, Oracle said that it expects the recommendation to be rejected, clearing the way for the company to appeal directly to PeopleSoft shareholders at their annual meeting due on March 25.
Such recommendations on antitrust cases usually provide an early indication about which way the department will lean in its final decision. Assistant attorney general Hewitt Pate, the head of the DOJ’s antitrust department, who will be making the final decision, has historically followed the recommendations of his staff.
Yet former Oracle attorney James Rill, who headed the DOJ antitrust division for three years, has stressed that “this process simply is not complete.” He continues: “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.”
Charles Di Biona, an analyst at investment bank Sanford Bernstein, told Reuters that the fact that PeopleSoft’s stock price has continued to trade well below Oracle’s higher bid reflected investors’ expectations that the merger would run into antitrust problems. “It’s sort of a political decision to prosecute,” he said. “The staff recommendation is heavily weighted, but not a done deal.”
If the DOJ does block the bid, Oracle CEO Larry Ellison has said he is prepared to fight the department in court, despite previously stating he would withdraw the bid if that were to happen.
Oracle has also accused Conway of “complicating and prolonging” the DOJ’s review after suggesting that the whole merger was Conway’s idea in the first place.
In a statement released to the media today, Jim Finn, an Oracle spokesman said: “The initial proposal to merge PeopleSoft’s applications business with Oracle’s applications business came from PeopleSoft CEO Craig Conway, who proposed he was the best person to run the combined companies’ applications business and never mentioned any antitrust concerns.”
The final decision will be made on 2 March.