US DoJ sues to block Oracle's $9.4bn PeopleSoft bid

It's bad news. Pure and simple

The US Department of Justice may have put end to Oracle's takeover bid for PeopleSoft, filing suit today to block the deal.

The DoJ did not mince words when describing why the deal should not go through, saying a PeopleSoft acquisition would result in higher prices, less innovation and fewer choices for customers. The government filed a civil antitrust suit in the US District Court in San Francisco to block Oracle from proceeding with the hostile takeover. Attorney Generals from Hawaii, Maryland, Massachusetts, Minnesota, New York, North Dakota, and Texas cast their lots in with the Feds.

"We believe this transaction is anticompetitive pure and simple," said R. Hewitt Pate, assistant attorney general in charge of the DoJ's antitrust division. "Under any traditional merger analysis this deal substantially lessens competition in an important market. Blocking this deal protects competition that benefits major businesses, as well as government agencies that depend on competition to get the best value for taxpayers' dollars."

With that, Pate sided with advisors who had recommended earlier that the takeover be blocked. Oracle was hoping Pate would go against Justice Department staffs' suggestions.

One of the Feds' main concerns was that Oracle would end up bidding only against SAP for human resources management and financial management services software deals. Having Oracle, PeopleSoft and SAP all bid on these deals helps keep a healthy level of competition going. Clearly, different rules apply for the corporate server software market than for desktop software.

(Won't it be interesting if Microsoft heats up its presence in the business software market. Will PeopleSoft shareholders be pleased with government intervention then?)

What did Oracle have to say about the decision?

"The Department of Justice decision follows an aggressive lobbying campaign by PeopleSoft management," said Jim Finn, an Oracle spokesman. "It is inconsistent with the overwhelming evidence of intense competition in the markets we serve, and we believe it is without basis in fact or in law. A combined Oracle/PeopleSoft will significantly benefit all customers and shareholders involved."

As expected, PeopleSoft was pleased by the government's move.

"Now that the antitrust day of reckoning has arrived and the Justice Department has announced its decision to sue to block the transaction, it is time for Oracle to abandon its efforts to acquire the Company. Both companies should now devote all of their energy to competing in the marketplace to provide better products and services for customers," said CEO Craig Conway.

Oracle, however, appears ready to keep fighting for PeopleSoft. In a statement that arrived just ahead of the DoJ announcement, CEO Larry Ellison vowed to push the Oracle board toward suing the DoJ. ®

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