9 March 2005 Oracle has launched a counter-bid for retail sector software specialist Retek, topping an agreed offer made by SAP.
The unsolicited bid of $525 million by the database and applications software giant follows the Retek board’s decision on 28 February to approve “a definitive merger agreement” with SAP for a price of $496 million – an offer that represented a 42% premium on Retek’s share price.
However, they had not counted on Oracle’s reaction to being scorned. Over Monday and Tuesday, Oracle signalled its intentions by buying up 5.5 million of Retek stock on the open market, giving it control over 10% of the company.
Oracle CEO Larry Ellison said he was reacting to SAP’s stated intention to gain control over 50% of the US applications market by the end of 2005. “Oracle’s applications business in North America is larger than SAP’s. We intend to defend our number one position,” he said.
In a letter to Retek’s board, Ellison emphasised that the two companies had a close existing partnership, highlighting how most Retek applications had been developed using Oracle tools and how 80% of Retek’s customers run on Oracle’s technology platform. Oracle disclosed that it had held takeover talks with Retek in October 2004 but these had come to nothing after Oracle became “distracted” by efforts to acquire PeopleSoft.
The pursuit of Retek – which counts Gap, Sainsbury’s and Tesco as users of its retail operations management and supply chain software – is indicative of a wider rivalry between SAP and Oracle. With its acquisition of PeopleSoft, Oracle is chasing SAP’s dominant position in the applications software market, while the German giant is moving aggressively into the middleware arena where Oracle is strong.
The acquisition of Retek will add annual revenues of around $175 million to the winning bidder’s balance sheet. The company is one of the largest specialists in retail software, with approximately 525 employees, but its revenues in recent quarters have been falling.
In response to Oracle’s bid of $9 a share, Retek’s share price rose to $8.59 on Wall Street yesterday, ahead of SAP’s finalised offer of $8.50.