Oracle tops SAP's offer for Retek

Oracle Corp. Tuesday announced plans to place a bid of its own for retail software maker Retek Inc., besting the US$496 million offer SAP AG made last week by almost 6 percent.

Larry Ellison, Oracle's CEO, sent a letter to Retek's board of directors yesterday stating that Oracle will commence a cash tender offer of US$9 per share for all outstanding shares of Minneapolis-based Retek. SAP had agreed to pay $8.50 per share.

"We evaluated SAP's bid to acquire Retek carefully ever since it became public," Ellison said in a conference call with analysts. "We decided that we were going to make a bid ourselves, partially at least to defend our No. 1 position in North America."

Retek sells a broad range of retail-based applications, including software for operations management, supply chain planning and execution, merchandise planning, and product demand forecasting.

The retail market is "under-penetrated," Ellison said. By acquiring Retek, Oracle would be able to pursue the market more aggressively. "We think it's strategically important for us to pursue this acquisition," he said

The retail sector is attractive to Oracle for a number of reasons, added Charles Phillips, Oracle's president. Retailers increasingly are migrating from custom to packaged applications that can handle multi-channel sales operations as well as emerging technology initiatives such as radio frequency identification (RFID).

"Retailers seem to be adding more stores, more product variety, more store formats, and that's creating the need for a full retail application suite that can handle all that diversity," Phillips told analysts.

Should Oracle's offer be accepted, the process of integrating Retek into Oracle's operations will be smooth, Ellison said. The two vendors have been partners for nearly a decade, and their products -- which support Java -- work well together already, he said. Already about 80 percent of Retek customers run the applications on an Oracle platform, Ellison said.

Among the retail customers the two vendors share are Nordstrom Inc., The Gap Inc., Hudson's Bay Co., Ann Taylor Stores Corp., JCPenney Co. Inc., Best Buy Co. Inc. and Tesco PLC.

Additionally, there is not the issue of redundant products that has complicated Oracle's ongoing $10.3 billion acquisition of PeopleSoft Inc.. "Unlike the PeopleSoft acquisition, there are no overlapping products. We'll be continuing the development of all of Retek's products," Ellison said.

Oracle's offer caps a deal that has been several months in the making, according to Phillips. The two companies began discussions last September, Phillips said.

With much of the PeopleSoft saga behind the company, the time was right to pursue the Retek deal, Phillips said. "Given the progress we've made with the PeopleSoft integration , we're in a good position to accelerate our efforts to acquire Retek at this point in time. We thought it was strategic in September; it remains so today."

Though it has been Oracle's intent to acquire Retek for some time, the vendor put its efforts on hold during the PeopleSoft acquisition process, Ellison said. "We were talking to Retek at the same time SAP was," Ellison said. "We were a bit distracted with the PeopleSoft integration process. When SAP made their bid, we decided to counter."

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