Oracle wins ruling in takeover fight

SAN FRANCISCO — A federal judge on Thursday rejected the government’s bid to block Oracle Corp.’s $7.7 billion takeover bid for rival PeopleSoft Inc. on grounds that a combination between the business software makers would throttle competition in a narrow market niche.

U.S. District Judge Vaughn Walker’s 164-page decision provides a major boost to Oracle’s hostile bid for PeopleSoft, which has repeatedly cited antitrust concerns as one of the primary reasons for snubbing its unwelcome suitor.

The Justice Department and 10 states, siding with PeopleSoft, brought an antitrust lawsuit here to block the bid nearly seven months ago. The suit, contested in a monthlong trial this summer, represented another dramatic chapter in a Silicon Valley soap opera starring Oracle’s flamboyant CEO, Larry Ellison, and a feisty former subordinate, PeopleSoft CEO Craig Conway.

Pleasanton-based PeopleSoft has rebuffed Oracle buyout offers four times in the past 15 months, but the company now may find it more difficult to resist its relentless rival since Walker has removed the antitrust hurdle.

Since the antitrust case began nearly seven months ago, PeopleSoft has become more vulnerable because of a sales slowdown that has decimated its profits and stock — a phenomenon that figures to make Oracle’s $21-per-share offer more appealing to many investors. PeopleSoft has blamed its disappointing performance on customer anxieties that were aggravated by the highly publicized trial.

PeopleSoft’s shares rose 46 cents to close at $17.95 on the Nasdaq Stock Market before Walker released his ruling, then surged $2.45, or nearly 14 percent, in extended trading. Oracle’s share gained 7 cents to close at $9.93 on the Nasdaq, then added 30 cents in extended trading.

“This decision puts the onus squarely on the board of PeopleSoft to meet with us … so that shareholders can accept our offer,” Oracle chairman Jeff Henley said in a statement.

Without setting a timetable, PeopleSoft said its board of directors will review the implications of Walker’s decision. The company emphasized that the board has previously concluded Oracle’s current bid is “inadequate from a financial point of view.”

Assistant Attorney General R. Hewitt Pate, who runs the Justice Department’s antitrust division, said he was disappointed with Walker’s decision. “The department is considering its options,” he said. Pate told reporters in July that he would consider an appeal if Walker sided with Oracle.

Walker said he is staying his order for 10 days to allow for a possible appeal.