DOJ Stalls Oracle-PeopleSoft Merger

Updated from 5:24 p.m. EDT

The U.S. Department of Justice on Monday delayed Oracle's(ORCL) proposed acquisition of rival software maker PeopleSoft(PSFT).

The delay, which is likely to last for several months, came in the form of a request for more information about the $6.3 billion hostile takeover.

"This does not mean that the staff (of the Justice Department) sees a problem with the acquisition," said Paul Friedman, who handles antitrust cases for the Philadelphia law firm of Dechert LLP. "It does mean that they have questions that need to be answered," he said.

Although a so-called second request for information can be resolved fairly quickly, a period of three to six months is typical, Friedman said.

Oracle spokesman Jim Finn said he wasn't surprised by the request. "It is important not to confuse process with outcome. We remain optimistic that the Department of Justice will conclude that this transaction is not anticompetitive."

Although expected, the delay is a plus for PeopleSoft, because it will probably give the company time to complete the less controversial, and much smaller, acquisition of J.D. Edwards(JDEC).

Once completed, the JDEC deal will add $1.75 billion to the cost of buying PeopleSoft, and adds layers of complexity to the job of integrating the products and cultures of the companies involved.

The Justice Department could make a similar request of PeopleSoft as the acquirer of J.D. Edwards. The government has until mid-July to review that proposed transaction.

No matter how the feds rule, Ellison still has to face PeopleSoft and the state of Connecticut in court, both having separately filed suit against the acquisition, and find a way to surmount PeopleSoft's formidable array of antitakeover defenses.

Shares of both Oracle and PeopleSoft lost ground Monday. Oracle was off 42 cents, or 3.4%, to $12.01; PeopleSoft was down 12 cents, less than 1%, to $17.56, nearly $2 below Oracle's latest offer of $19.50 a share. But shares of J.D. Edwards gained 9 cents, or less than 1%, to $14.31.

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