Wednesday, March 09, 2005

Bidding war: Oracle fighting SAP over Retek

Oracle is offering $9 per share for Retek, a leading software vendor for the retail industry, topping SAP's deal with Retek last week at $8.50 per share. At the time of the SAP/Retek announcement, I said that the deal was probably motivated by SAP's attempt to gain ground against Oracle in the retail industry, especially since Oracle's acquisition of PeopleSoft gave Oracle a stronger presence in the retail sector. Apparently, Oracle saw it that way as well and is trying to block SAP's move.

As of this writing, Retek shares are trading above Oracle's price, indicating that investors are expecting a bidding ware between Oracle and SAP.

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But looking at Retek's stock price, you wonder whether there might have been some insider trading going on. Oracle announced its bid for Retek after the market close on Tuesday. But on Monday and all day Tuesday, Retek's share price began to climb above SAP's offer of $8.50. On the other hand, Oracle revealed that it has already accumulated 10% of Retek's stock, so maybe that accounts for the price rise prior to the announcement.

Oracle's move was a surprise, since Oracle has its plate full with PeopleSoft right now. But apparently, Oracle does not want to stand by and allow SAP to scoop strategic deals unless it is willing to pay top dollar. So, what other software vendors might be the next Retek? JDA Software, Retek's main competitor in the U.S., is an obvious candidate. But I'll go out on a limb and put Lawson and Manugistics on the list as well. Both could be strategic deals for either SAP or Oracle, and neither of them are large deals. Lawson's market cap is about half a billion, similar to Retek's, and Manugistics is valued at only $176M.

Update, Mar. 11. In an e-mail exchange, Peter Coleman at ThinkEquity, an investment research firm, writes that he doesn't think there will be a bidding war and that Oracle needs Retek more than SAP does.

[For a bidding war to take place,] you need to have two irrational buyers, and in this I think there is only one. SAP may come back with one better but that will be it. They will walk away before it gets to $10.50.

I don’t think it’s a bluff. This is a must have deal for ORCL. They had been planning on buying Retek but were not in a rush because they thought Retek wasn't going anywhere. PSFT gives them some stuff in retail but not the core transaction system. With out Retek, Oracle is done in retail. On the other hand, SAP still has their solution. It's not growing as fast as they would like, but it is gaining traction.
Coleman also points out that JDA is probably not an alternative target to Retek for Oracle, even though PeopleSoft already has a relationship with JDA. The reason: JDA's products are based on Microsoft's technology, which is of no interest to Oracle. Retek, on the other hand, is Oracle based.

Related posts
SAP targets retail industry with acquisition of Retek
Manugistics prepping itself for the auction block?
Lawson shows the door to another 75 employees

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