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. Last Updated: 07/27/2016

Regulator Blocks PeopleSoft Bid

SAN FRANCISCO -- U.S. Justice Department lawyers are recommending that Oracle Corp.'s hostile takeover bid for business software rival PeopleSoft Inc. be blocked for antitrust reasons, a step that could kill the proposed $9.4 billion deal before shareholders get a chance to vote on it. PeopleSoft, which has been citing antitrust concerns as one of the reasons it has spurned Oracle for eight months, said the Justice Department informed the company of its long-awaited recommendation Tuesday night.

The recommendation does not necessarily mean the federal government will stand in the way of Oracle's pursuit of PeopleSoft. That decision ultimately will be made by Assistant Attorney General R. Hewitt Pate, the Justice Department's antitrust chief. Pate is expected to reach his decision by March 2.

Oracle predicted Pate will reject his subordinates' advice and clear the path for the Redwood Shores, California-based company to make its case directly to PeopleSoft shareholders at a pivotal meeting scheduled March 25.

"Over the course of my 45 years of antitrust practice, I have seen many instances in which the assistant attorney general's decision differed from that recommended by the investigating staff," said Oracle attorney James Rill, who headed the Justice Department's antitrust division during the administration of President George H.W. Bush.

Rill said he overruled his staff on several occasions during his three-year stint overseeing the antitrust department.

The recommendation nevertheless represents a significant victory for Pleasanton, California-based PeopleSoft and its CEO Craig Conway, who has predicted antitrust regulators would not allow Oracle to swallow his company.

Conway, a former Oracle executive, contended the proposed takeover would hurt competition in the $20 billion market for business applications software -- the computer coding that automates a wide range of administrative jobs.

Oracle had argued the deal would create a much stronger company better equipped to compete with the market leader, Germany-based SAP, and Microsoft as it offers more business applications products.

A team of Justice Department lawyers conducted a lengthy review of the deal, taking sworn depositions from customers and key executives, including Oracle CEO Larry Ellison.

Ellison, whom Conway has likened to Genghis Kahn, has said he feels so strongly about the merits of the takeover that he might fight the Justice Department in court if Pate decides to file an injunction. Oracle officials say the final decision on whether to fight the Justice Department will rest with the company's board.

News of the Justice Department's recommendations comes less than a week after Oracle sweetened its takeover bid for a second time, raising its all-cash bid by 33 percent, from $19.50 per share to $26 per share.

But PeopleSoft's stock price has continued to trade well below the higher bid, reflecting investor pessimism about Oracle's prospects for gaining antitrust approval. PeopleSoft's board dampened the takeover hopes even further Monday by calling the new bid inadequate.