Oracle wins Retek takeover battle

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Oracle has beaten SAP off to buy retail software firm Retek, but it’s costing a cool $670 million to do so.

"Oracle has the largest applications business in North America and we intend to expand that leadership position," Oracle CEO Larry Ellison said in a statement. "Combining Oracle with Retek is an important step in that direction, and it strengthens our position in the retail applications market globally."

SAP - which had triggered the bidding war by making an opening offer for Retek earlier this month - withdew from the battlefield saying that it was not prepared to pay any price for the firm. "As a responsible investor, SAP made an appropriate offer," SAP chief executive Henning Kagermann said. "Neither SAP's investors nor the present and future customers in the trade segment would have benefited from a further bidding battle - and nor would it in the long term have brought the success that we expect.."

Kagermann added: "As a disciplined investor, SAP established a premium price for this niche business. However, 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. With 2,400 customers in the retail industry, we are the leading solution provider to the retail industry, and we will successfully meet any competitive challenge in this market segment.

"SAP's leadership in retail comes from customers who choose us for the strategic value of our solutions and for our unparalleled industry-specific business process expertise. The best way to obtain leadership in an industry, in particular the retail industry, is to earn leadership through delivering customer value. We remain confident in SAP's ability to lead the retail market by helping retail customers grow and be successful."

Retek’s board of directors was understandably pleased with the outcome which the company’s asking price shoot up. "We believe that Oracle's offer is a good deal for Retek stockholders, and all directors in attendance at our board meeting have recommended that it be accepted," said Marty Leestma, president and chief executive of Retek. "We will work with Oracle over the next several weeks to ensure that the integration is not disruptive for our clients and employees."

With just $174 million in annual revenue and 525 employees, Retek is a niche player in the industry, but it has a trump card in the shape of 200 customers in the lucrative retail sector of the market. Oracle noted that nearly four in five Retek customers run that company's applications on top of Oracle's database.

"This is all over remarkable quickly, considering the enmity between the two bidders," said David Bradshaw, principal analyst with research firm Ovum. "So SAP's offer of $11 a share really was its final offer, and the speed of Oracle's response with $11.25 - just a few hours after SAP's bid - showed that Oracle was prepared to go even higher if necessary.

"We suspect that SAP had already decided not to spend $650 million plus on Retek before it announced the dividend increase. Oracle will be very pleased - but it needs Retek more than SAP, which already has quite a strong retail solution. 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."

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