March 8, 2005 2:18 PM PST

Oracle to bid on SAP buyout target

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Oracle is muscling in on SAP's bid to buy software maker Retek, saying it plans to best its rival's $8.50 per share offer with a $9 bid on Wednesday.

The database software giant, which just completed a $10 billion acquisition of PeopleSoft in January, made it clear that the move is intended as a shot across SAP's bow.

"Oracle's applications business in North America is larger than SAP?s," Oracle CEO Larry Ellison said in a statement Tuesday. "We intend to defend our No. 1 position."

Over the past two days, Oracle purchased 5.5 million shares of Retek, giving it a nearly 10 percent stake in the Minneapolis-based company.

SAP agreed last week to pay $8.50 per share for Retek, or roughly $496 million. The companies said they expected to close the deal, pending shareholder and regulatory approval, in early April.

Oracle had eyed Retek and a number of other software companies last year as a buyout alternative to PeopleSoft had it failed to consummate that deal. Like that much larger bid, Oracle's Retek offer comes as a surprise and is largely a response to a rival's move--in that case, PeopleSoft's announcement that it planned to buy J.D. Edwards.

In a letter to Retek's board, Ellison outlined a number of reasons why Oracle's offer is superior to SAP's. In addition to offering more money for the company, Oracle is a long-time Retek partner, so the companies are already well-acquainted, and more than 80 percent of Retek's customers are also Oracle database customers, he said. There are a number of technical similarities as well.

"Most importantly, unlike SAP, we share a vision of the future with applications built in the Java programming language and based on industry standards," Ellison said in the letter.

SAP issued a statement on Wednesday claiming that its NetWeaver integration software offered better interoperability with both Java and Microsoft's .Net programming environments. "SAP is committed to openness to all databases in the market, not locking customers out of choices," according to the statement.

Retek designs software for retail businesses, which brought in revenue of $174.2 million for the company last year. It employs a staff of 525. SAP had said that adding Retek products to its own collection of business management programs would help it target a retail industry that has a newfound appetite for such technology.

California-based Oracle and SAP, which is headquartered in Germany, are wrestling for global dominance in the market for business systems software. The programs from both companies are designed to automate a broad set of corporate tasks, from fielding customer service calls to organizing assembly lines. Demand for such software has deflated over the past several years, triggering a wave of mergers and acquisitions in the market.

Retek shares rose $1.94, or 23 percent, to $10.53 in Wednesday afternoon trading on the Nasdaq Stock Market, a new 52-week high.

 

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