Judge lets Oracle pursue PeopleSoft

Justice Dept. disappointed, considering appealing

The way has been cleared for Oracle to proceed with its 15-month-old hostile takeover bid for PeopleSoft, with the judge presiding over the case rejecting the US Department of Justice's effort to block the $US7.7 billion offer on antitrust grounds.

In a 164-page ruling issued late Thursday, Chief Judge Vaughan Walker of the US District Court in San Francisco wrote that the DoJ's attorneys had failed to prove that a merger of Oracle and PeopleSoft "is likely substantially to lessen competition" in the business applications market.

Oracle immediately requested a meeting with PeopleSoft's board of directors and called on PeopleSoft to lift the various poison-pill mechanisms it has put in place to fend off the bid. In a statement, Oracle declared that Judge Walker's decision "removes a significant roadblock to the acquisition."

However, the judge stayed his ruling for 10 days to give the DoJ a chance to file an appeal, and the agency said it's considering doing so.

"We are disappointed in the court's decision," R. Hewitt Pate, assistant attorney general in charge of the DoJ's antitrust division, said in a statement. "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 human resources management and financial management systems software."

Oracle still faces an ongoing antitrust review by the European Commission. It also needs to overturn PeopleSoft's anti-takeover provisions, which it's challenging in a lawsuit. The trial in that case is scheduled to start September 27.

The two rivals are also engaged in a legal battle in California's Alameda County Superior Court, where PeopleSoft has charged Oracle with unfair business practices. Oracle countered with a complaint claiming that PeopleSoft illegally refused to evaluate its bid and improperly created a "customer assurance program" to make an acquisition more costly for Oracle. That case is scheduled to go to trial in November.

PeopleSoft said its board would review Judge Walker's ruling and its implications, but the company wouldn't disclose when the board's next meeting is scheduled to take place.

Mitch Myers, vice president of operations at FW Murphy, a PeopleSoft user in Oklahoma, said he's waiting to see more detailed responses from the DoJ and PeopleSoft before making any judgments about the ruling's potential impact on the takeover battle.

PeopleSoft won't necessarily throw in the towel yet, said Paul Hamerman, an analyst at Forrester Research "I wouldn't underestimate PeopleSoft's resolve to keep this from happening," he said. But he added that PeopleSoft, which blamed its weak second quarter sales on the public relations fallout from the trial between Oracle and the DoJ, now likely will find it even harder to close deals.

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