Feds sue to block Oracle's deal for PeopleSoft

In one of the sharpest blows yet to Oracle Corp.'s hostile attempt to takeover software rival PeopleSoft, the federal government sued to block the $9.4 billion deal today.

"This transaction is anticompetitive ? pure and simple," R. Hewitt Pate, an assistant attorney general in the Justice Department's Antitrust Division, said in a statement. "Under any traditional merger analysis, this deal substantially lessens competition in an important market."

Earlier this month, Justice Department lawyers recommended that the government oppose the merger and attorneys general from seven states joined the lawsuit, which was filed in Federal District Court in San Francisco.

Only three companies ? Oracle, PeopleSoft and SAP ? sell sophisticated integrated human-resource management and financial management software, the Justice Department said.

"Large companies, institutions, organizations and government entities depend on competition to provide and maintain enterprise software that is critical to their effective and cost-effective day-to-day operations," Pate said. "This lawsuit seeks to ensure that there will continue to be vigorous competition in this important industry."

Oracle made its offer for PeopleSoft of Pleasanton, Calif., last June, days after PeopleSoft announced it would buy software provider J.D. Edwards & Co.

Oracle vows to press on with its current offer of $26 a share.
"The Department of Justice decision follows an aggressive lobbying campaign by PeopleSoft management," Jim Finn, Oracle spokesman, said in a statement. "It is inconsistent with the overwhelming evidence of intense competition in the markets we serve, and we believe it is without basis in fact or in law. A combined Oracle/PeopleSoft will significantly benefit all customers and shareholders involved."

At the close of trading today, PeopleSoft's shares were at $21.78, down about 1.5 percent. Oracle's shares were virtually unchanged at $13.28.