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Oracle seeks Europe's approval of buyout

The database giant officially notifies the European Commission of its hostile bid for PeopleSoft.

Oracle on Tuesday officially submitted its notification papers to the European Commission over its hostile bid for PeopleSoft.

The filing activates a 30-day deadline for antitrust regulators to determine whether to allow its takeover bid to go through or seek a more in-depth review.

If the European Commission or the U.S. Department of Justice challenge the merger, it could be a deal stopper for Oracle. Over the years, the European Commission, an antitrust regulatory body for the European Union, has increasingly wielded great power in determining the fate of companies' mergers. Its role is considered to be as influential as that of the Justice Department, antitrust experts say.

The commission has set a provisional deadline to make a decision on the deal by Nov. 17, according to a filing on the agency's Web site.

If the commission determines that it wants a closer look at the takeover bid, it can move the deal into its "in-depth second phase," which can last up to four more months.

Oracle said it is optimistic that the European Commission will ultimately issue a favorable decision on its bid.

"We look forward to working with the commission and are confident that, at the end of the day, the European Commission will see that this transaction does not raise any serious antitrust issues," said Jim Finn, an Oracle spokesman.

PeopleSoft and some attorneys who specialize in antitrust issues expressed doubt that the transaction will pass antitrust review.

"We've said this before, that Oracle's hostile bid faces severe antitrust issues," said Steve Swasey, a PeopleSoft spokesman. "We think this is behind us, and our management's focus is on moving ahead."

Meanwhile, one attorney familiar with antitrust issues said: "It strikes me that it would be unduly optimistic to have this deal go through without a second-phase investigation. This is a three-to-two deal here and a three-to-two deal in Europe. There are three large competitors in this (business applications) market now and two after the merger."

In another analyst's opinion, European Commission regulators are unlikely to block the deal or spend a great deal of time reviewing it, because PeopleSoft and J.D. Edwards have relatively small shares of the European business applications market, which German software maker SAP dominates.

"I think they're almost guaranteed a favorable review," said Jim Shepherd, an analyst at AMR Research. If anything, he said, the European Commission review "might have public relations value (for Oracle)."

Before filing its official notification, Oracle provided documents and information to the European Commission as part of a "prenotification process," Chuck Phillips, executive vice president of the company, said during a press conference at OracleWorld in September.

Prenotification allows European regulators to become familiar with the case and issues involved, before the strict 30-day deadline kicks in once a formal notification is filed.

Oracle is also in the process of supplying documents and materials to the Justice Department, after the agency made a second request for more information. During the company's annual shareholders meeting Monday, Jeff Henley, Oracle's chief financial officer, said he hopes regulators will wrap up that effort by November or December.

"If the (Justice Department) says we can't buy, it's over," Oracle CEO Larry Ellison said during an analyst presentation in July.

Once Oracle has fully complied with the department's second request, federal antitrust regulators will have 30 days to determine whether to approve, modify or challenge the deal. Oracle can agree to extend the agency's 30-day review deadline, whereas the European Commission has less flexibility.

Oracle announced its $16 per share takeover bid for PeopleSoft in early June and later raised its offer to $19.50 per share.

PeopleSoft, meanwhile, has argued that the deal poses antitrust issues and pointed to both a lawsuit Connecticut filed against Oracle and state attorneys general investigations in 38 states. Canada is also reviewing the proposed merger for antitrust issues.

Even if the European Commission makes a decision before the Justice Department or the 38 state attorneys general do, it may not have great sway with domestic regulators.

"The states will look at the facts the EC used in making their decision and see if the information they used is similar to what we have," said Brady Johnson, assistant attorney general with the antitrust division for Washington state, referring to how states generally review a European Commission decision in a merger case.

"But considerations will likely be very different," Johnson added. "There are different market share issues here compared to Europe; different laws to apply. It's not a one-to-one consideration."

The same may hold true for the Justice Department as well.

"At the end of the day, the EU's decision will not matter to the DOJ. This is not a situation where what the Europeans do will be important to us. It's not like it's two European companies merging. If anything, Oracle may want to get a DOJ decision before getting one from the EU," an attorney who specializes in antitrust issues said. "The EU does not want to approve a deal, if the DOJ later says it's a problem. There's some who argue that this makes the EU look kind of bad."