Life During Wartime Suits Retek Holders - TheStreet

Life keeps getting better for




The bidding war for the retail-industry software maker intensified Thursday, as Germany's


(SAP) - Get Report

ratcheted up its offer by 29%. Retek told shareholders to take the money, but investors were betting


(ORCL) - Get Report

would take the bait and raise its own bid.

Shares in Retek surged 11% following SAP's $617 million offer.

SAP's latest move came before the bell on Thursday. The company sweetened its offer to $11 from $8.50 a share a few weeks ago. The competition for Retek was joined soon after, when Oracle

countered with a $9-a-share bid of its own.

"We believe that SAP's offer is a good deal for Retek stockholders, and our board of directors has unanimously recommended that it be accepted," Retek Chief Executive Marty Leestma said in a press release Thursday.

Oracle had no immediate comment on SAP's move, but Wall Street was betting that another offer is likely before SAP's bid expires on April 1. Investors quickly pushed Retek stock above the offer price; in recent trading shares were up $1.15 to $11.67.

SAP slipped 2 cents to $40.25, and Oracle rose 24 cents to $13.26.

Richard Williams, chief software analyst for Garban Institutional Equities, noted that Oracle would have to add at least 45 cents a share to SAP's offer, because of a walk-away provision in SAP's bid. Still, he saw no hurdles to that happening.

"We expect higher bids before the deal is done; ego is worth a lot more than $150 million

the cost of a counter-offer to a top-12 billionaire!" he wrote in a note to clients.

Ego is a factor, to be sure, but as Williams and other analysts point out, the takeover struggle is more about Oracle and SAP fighting to add capabilities and customers to their portfolios.

Retek specializes in software that helps retail companies to perform numerous activities including inventory and order management, point of sales operations and more -- areas that SAP, the world's largest seller of enterprise business applications, has attempted to enter several times with only limited success.

Although investors were euphoric Thursday, there was some concern that Oracle might be tempted to overpay for Retek. "Oracle's dogged pursuit of PeopleSoft seems to indicate that Oracle management is fairly price-insensitive when it comes to completing mergers that they view as strategic," said Sanford Bernstein analyst Charles Di Bona, whose company doesn't have an investment banking relationship with Oracle.

Di Bona has castigated Oracle in the past for its "lack of discipline. "Such apprehensions about Oracle's stewardship of shareholder resources could drag on Oracle's share price in coming months as the market reassess the outlook for Oracle's future uses of capital," he said in a note to clients.