The European Commission on Tuesday gave

Oracle

(ORCL) - Get Report

the green light to acquire

PeopleSoft

(PSFT)

, the last regulatory hurdle blocking the $7.7 billion hostile takeover.

The deal was approved without any conditions, Commission spokesman Reijo Kemppinen told reporters. The commission is the executive arm of the European Union, which has jurisdiction because both business software makers sell products in Europe.

The move was expected, and follows a decision in September by a U.S. District Court Judge who ruled that the merger would not unduly damage competition in the market for high-end business software.

In a written statement, PeopleSoft's board said it is reviewing the EU decision, and reiterated its position "that the current offer was inadequate and did not reflect PeopleSoft's real value."

In recent trading, shares of both companies were up fractionally. Oracle was up 7 cents to $12.20, and PeopleSoft had gained 8 cents to $19.84. Oracle's latest bid in the 16-month-old battle is $21 a share.

Although Oracle executives have recently been talking down the value of the deal, Lehman Brothers analyst Neil Herman said in a note published Tuesday that "even at a price in the high $20s

the deal would be extremely accretive for Oracle. Based on recent results, it appears the ORCL applications business is challenged, and a strategic combination would therefore make a lot of sense.

"Also important to Oracle would be the profitable, high-margin recurring maintenance revenue stream of PeopleSoft's large installed base of 13,000 customers." (Lehman Brothers has an investment banking relationship with PeopleSoft, but not with Oracle.)

Still pending is a decision by a Delaware judge regarding a suit brought by Oracle to remove two of PeopleSoft's anti-takeover defenses: a money-back guarantee to buyers in the event that Oracle acquires the company and doesn't support PeopleSoft products; and a poison pill that would dilute PeopleSoft's shares, making the acquisition prohibitively expensive.

Judge Leo Strine of the Delaware Chancery Court indicated earlier this month that the guarantee, or customer assurance program (CAP), no longer appears to be a significant obstacle to the deal since Oracle has not made the offer conditional to its removal.

"There seems to be some sense in his remarks from the bench that the companies are closer to a more workable CAP," said William Lawlor, who heads the M&A practice of Dechert, a Philadelphia-based law firm.

Oracle has said that it will support PeopleSoft's products and will therefore not trigger the program. In theory, the CAP could cost Oracle more than $2 billion.

That leaves the poison pill, a provision that Strine has not publicly addressed. "Although it is a possibility, it would be tough for him to overturn 15 years of precedent in Delaware and remove it," said Lawlor.

"Even if PeopleSoft wins on the CAP and the pill redemption point, it faces a proxy contest next spring, and that is a ticking time bomb," Lawlor added.

Sources close to the case said that the judge is not known to move very quickly to decide politically charged cases.

Yet another lawsuit, a claim by PeopleSoft alleging that Oracle has engaged in unfair business practices, including a deliberate campaign to mislead PeopleSoft's customers and disrupt its business, is scheduled to go to trial before a jury in Oakland, Calif., on Jan. 10. PeopleSoft is claiming more than $1 billion in damages.