A federal judge handed Oracle a victory on Thursday, ruling that the company's acquisition of software rival PeopleSoft would pose no threat to competition in the corporate software market.
US District Court Judge Vaughn Walker sided with Oracle against the US Department of Justice, which opposes the proposed merger. The agency took Oracle to court in June, charging that a PeopleSoft buyout would empower Oracle to illegally raise prices and would impair innovation in the industry. Oracle argued that it couldn't raise prices with Germany's SAP and a raft of other rivals competing against it. In his 164-page ruling, Walker sided with Oracle on most counts: "Plaintiffs have not proved that a post-merger Oracle would have sufficient market share in the product and geographic markets" to be anticompetitive.
"Plaintiffs have not proved that the product market they allege, high-function (business software), exists as a separate and distinct line of commerce," Walker added.
The judge also said the Justice Department did not prove that the business software of "numerous other vendors," including Lawson Software, American Mangement Systems and Microsoft, does not compete with the similar products of Oracle, PeopleSoft and SAP.
In summing up his strongly worded opinion, Walker concluded, "Because plaintiffs have not shown by a preponderance of the evidence that the merger of Oracle and PeopleSoft is likely substantially to lessen competition in a relevant product and geographic market in violation of (antitrust laws), the court directs the entry of judgement against plaintiffs and in favour of defendant Oracle."
Walker said his order is stayed 10 days to permit the Justice Department to appeal.
The verdict allows Oracle to pursue its $7.7bn hostile bid to buy PeopleSoft. Oracle has been chasing its unwilling target for nearly 15 months and has spent the last six months fighting the government's antitrust suit. In reaction to the ruling, Oracle called for PeopleSoft to drop the defences it had erected against the takeover attempt.
"The decision puts the onus squarely on the board of PeopleSoft to meet with us and to redeem their poison pill so that shareholders can accept our offer," Oracle Chairman Jeffrey Henley said in a statement.
Oracle wasted no time turning up the heat on PeopleSoft. In a letter to PeopleSoft's board, Henley and CEO Larry Ellison said, "With the removal of the US antitrust issue, and given our commitment to acquire PeopleSoft, we are hopeful a transaction can occur...We look forward to meeting with you at your earliest convenience to discuss our offer."
Oracle extended the deadline of its all-cash $21-per-share offer to Sept. 24. It had been set to expire Friday. PeopleSoft's shares closed at $17.95 on Thursday. They jumped 13 percent in after-hours trading, selling at $20.40.
Oracle shares closed at $9.93 and rose 2.6 percent to $10.19 in after-hours session. Walker issued his decision after the close of trading.
PeopleSoft said it will "review the implications" of the ruling and noted that it had rejected Oracle's previous offers.
In its response, the Justice Department said, "We are disappointed in the court's decision. We believe the facts and evidence in this case support our position that Oracle's proposed acquisition of PeopleSoft would result in a substantial lessening of competition in the markets for high-function (business software)."
The department said it is "considering its options" after Walker's ruling. The government has 60 days to file an appeal. Additionally, the European Commission is weighing the antitrust implications of the Oracle bid.
You can read the full decision (PDF file) here.
