EU Approves Oracle's Hostile Bid for Rival

SAN FRANCISCO -- The European Commission on Tuesday approved Oracle's proposed $7.7 billion hostile takeover of rival business software company PeopleSoft, clearing the last antitrust hurdle to the deal.

PeopleSoft said its board will review the implications of the commission's decision, but reiterated it has unanimously rejected each of Oracle's offers, including its current offer of $21 per share, because they undervalue the company. Oracle had no comment about the commission's decision, which was widely expected.

Analysts said the decision puts a greater focus on what price Oracle might ultimately pay for PeopleSoft and the outcome of PeopleSoft's customer rebate program, which industry analysts and Oracle believe is a poison pill aimed at preventing Oracle's takeover bid.

"From here, it's now about price. Everyone expected the commission's decision," said Charlie Di Bona, a Sanford Bernstein analyst who does not own PeopleSoft or Oracle stock.

Oracle again renewed its $21-per-share tender offer last week but said it was "subject to Oracle's right to terminate or amend the offer at any time" -- the first time Oracle has added that comment when renewing its bid, launched in June 2003.

A Delaware judge could rule within weeks, if not days, whether to force PeopleSoft to repeal its customer rebate program, which pledges rebates of two to five times the cost of PeopleSoft software to customers if Oracle buys PeopleSoft and then lets customer service drop below certain standards.

Oracle sued PeopleSoft to get the program dismissed. Oracle has pledged to support PeopleSoft's products, but has feared being stuck with the rebate program's liabilities, which are valued at $2.4 billion.

The commission, the European Union's executive, approved Oracle's takeover proposal without any conditions, commission spokesman Reijo Kemppinen told reporters.

Some analysts have speculated Oracle might have to sweeten its offer in order to get PeopleSoft's board and shareholders to approve the deal, which received U.S. court approval to move forward in September after a judge rejected the U.S. Justice Department's antitrust concerns.

But analysts are mixed on what is a "good" price for Oracle to pay for PeopleSoft, whose software products are used by many multinational companies to automate and run business processes such as payroll.

Lehman Brothers, for example, said in a research note Tuesday that a takeover price in the "high $20s" would make financial sense.

The legal tussles between PeopleSoft and Oracle are set to continue. PeopleSoft is seeking $2 billion in damages from Oracle, accusing it of launching its takeover bid to damage PeopleSoft's business. That trial is scheduled to start on Jan. 10.