Update: Oracle overcomes SAP to acquire Retek

SAP bows out of bidding war, opting to practice 'financial discipline'

Oracle has won its bidding war against German software rival SAP to acquire retail management software developer Retek, Oracle said on Tuesday.

Oracle and Retek have signed a definitive merger agreement that will see Oracle acquire the Minneapolis company for $11.25 per share, Oracle said, equivalent to about $630 million. SAP confirmed separately that it has dropped out of the bidding, saying it chose to exercise "financial discipline."

The bidding war had been closely watched thanks to the rivalry between SAP, the world's largest business applications vendor, and Oracle, which became No. 2 in the market in January when it completed its hostile takeover of PeopleSoft.

Retek sells a variety of retail-focused applications, including software for operations management, supply chain planning, merchandising, and demand forecasting. It has about 550 employees and reported a profit of $8.2 million for 2004, on revenue of $174.2 million.

The acquisition strengthens Oracle's footing in the retail applications business, where it was not seen as a particularly strong player. The Redwood Shores, California, company was also keen to buy Retek in order to keep its lead over SAP in the North American market, where it has more customers, Chief Executive Officer Larry Ellison said in a conference call earlier this month.

The retail industry remains strategically important to SAP, which has 2,400 retail customers, the German company said Tuesday. But it was not prepared to take part in a battle that would have driven Retek's price unreasonably high, it said.

"We concluded that neither our shareholders nor retail customers would benefit from an auction process that would further inflate the purchase price, and in the long run, not deliver the returns we demand," Henning Kagermann, SAP's CEO, said in a statement.

In fact, Retek was more important to Oracle than to SAP, which already has quite a strong set of retail offerings, according to David Bradshaw, principal analyst with Ovum in London.

"SAP will not be altogether disappointed, because it forced Oracle to pay a very high price. Most pleased of all will be Retek shareholders, who have seen the value of their shareholding nearly doubled in a month," he wrote in a commentary about the deal.

SAP was first to bid for Retek late last month, offering $8.50 per share. Oracle countered a week later with an offer of $9 per share. SAP then made what it said would be its final bid, offering $11 per share. Oracle has now trumped that with $11.25 per share, apparently ending the battle.

The price Oracle has agreed to pay is below Monday's closing price of $11.46 for Retek (RETK) shares on the Nasdaq stock market, but well above the $6 at which Retek's shares were trading in late February before SAP made its first offer.

Oracle had already been in talks to buy Retek earlier in the year, Ellison said earlier this month, but was too distracted by the fight over PeopleSoft to make a deal.

Nearly 80 percent of Retek's customers run their applications on Oracle's database, Oracle said Tuesday.

Marty Leestma, Retek's president and CEO, called Oracle's offer a good deal for Retek's shareholders. The company will work with Oracle over the coming weeks to avoid disruption for Retek's customers, he said.

Oracle said last week that its purchase had received early clearance from U.S. regulators.

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