Court Paves Way for Oracle-PeopleSoft Deal

Saying the government failed to prove its case, a federal court has eliminated the major obstacle hindering Oracle's $7.7 billion hostile takeover bid of rival PeopleSoft.

The Department of Justice went to court to block the deal on antitrust grounds earlier this year, charging the takeover would eliminate one of just three companies in the big-business software market.

U.S. District Court Judge Vaughn R. Walker, however, ruled that if the merger takes place, Microsoft and other outsourcing firms would provide enough competition in human resources and payroll software market, the Wall Street Journal reported.

Meanwhile, SAP Chief Executive Henning Kagermann told the German newspaper Welt am Sonntag that the merger could cause Oracle big problems that “we will use to win further market share."

"We view a takeover increasingly positively,” he said. "This way we would have one competitor that we can focus on."

The ruling was a surprise to many observers.

“It's a historic loss for the Justice Department,” said Gregory Taxin, chief executive officer of San Francisco's Glass, Lewis & Co., which advises institutional investors on proxy votes. “Rarely have companies challenged the judgment of the federal government on antitrust matters and even more rarely have they won,” the San Francisco Chronicle reported.

Some also say the decision could spark other companies to consider mergers.

John DiFucci of Bear Stearns told the Wall Street Journal that the software industry is “ripe for consolidation. This speeds things up.”

PeopleSoft has remained steadfast in its opposition to the takeover bid, rejecting four offers so far. "This decision puts the onus squarely on the board of PeopleSoft to meet with us and to redeem their poison pill so that the shareholders can accept our offer," said Oracle Chairman Jeffrey Henley in a statement.

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