European Commission Looking Into Oracle's Bid For PeopleSoft

The timetable for resolution of Oracle's hostile takeover attempt on PeopleSoft Inc. has been extended to March as the European Commission decided to open a four-month investigation into the issue.

This week's announcement by the antitrust agency was bad news for Oracle, which had originally hoped to wrap up its $7.3 billion bid by this month. However, Oracle immediately dug in its heels. "We are in this for the long haul and we remain committed to completing our intended acquisition of PeopleSoft," Oracle spokesman Jim Finn said. "We are not surprised by the European Commission's decision. We continue to work closely with the EC throughout this process."

The European Commission also brought another company into the investigation--ERP software developer SAP. "The initial one-month investigation has shown that the combination of two of the largest competitors in the market merits further analysis, especially as the number of key players would be reduced from three to two--Oracle and SAP--in certain applications markets," the commission said in a statement.

In Europe, Oracle and PeopleSoft compete in the business applications market with market-share leader SAP, which is based in Germany. Since the takeover bid was launched, SAP has widened its lead and the company attributes its strong advance in sales to confusion among IT managers over the takeover bid.

Although it hasn't said so, the European Commission could examine Oracle's dominant position in the database market, too. The European market is important to Oracle, contributing 35% of the company's revenue in recent quarters.

PeopleSoft seemed pleased with the commission's decision to lengthen the examination into the takeover attempt. In a statement, PeopleSoft said: "The European Commission's decision reflects what we believe is the Commission's concern about the anticompetitive impact of Oracle's unsolicited tender offer on the industry. In addition to the European Commission's review, Oracle's unsolicited offer continues to be the subject of ongoing reviews by the U. S. Department of Justice and a task force of state attorneys general."

The Department of Justice has been studying the issue and is expected to announce its decision in a month or two at the latest. In recent years, the United States and European antitrust agencies have been exchanging information and working together on some related cases, so this week's development in Brussels could complicate things further. The United States has a long history of antitrust, but in recent years, the Bush Administration has not been pursuing antitrust aggressively. However, the current European antitrust chief, Carlo Monti, has been aggressive, striking down mergers not deemed to be beneficial to markets and business.

European regulators could approve the merger, turn it down, or approve it with modifications.