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Reuters
Monday, November 17, 2003; 12:37 PM

BRUSSELS -- The European Commission said on Monday it will carry out a four-month in-depth investigation of Oracle Corp.'s proposed $7.3 billion hostile takeover of rival software company PeopleSoft.

The EU executive has already looked at the impact of such a merger for a month and has now decided to deepen its probe.

"The initial one-month investigation has shown that the combination of two of the largest competitors in the market merits further analysis especially as the number of key players would be reduced from three to two -- Oracle and SAP -- in certain applications software markets," said the Commission in a statement.

The Commission said it would in particular investigate the impact of Oracle's proposal on the markets for business applications software used by large multinational companies to coordinate and plan their financial and human resources and relationships with customers.

It said it may also investigate any potential effects in the relational database market, where Oracle has a particularly strong presence.

Oracle was not surprised by the Commission's decision, adding it still aimed to acquire PeopleSoft.

"We have said before that we felt a phase two review would be initiated, so we are not surprised by the European Commission's decision. We continue to work closely with the EC throughout this process" said Oracle spokesperson Jim Finn.

"We are in this for the long haul and we remain committed to completing our intended acquisition of PeopleSoft," he added.

The decision by the Commission injects it into a messy fight between two northern California high-tech companies which happen to be major players in the software that runs the back offices of major corporations, handling such operations as human resources and inventory.

The third big company in the global business software market is SAP Ag.

The European Commission has jurisdiction because both PeopleSoft, of Pleasanton, California, and Oracle, of Redwood Shores, California, sell a lot of their products in Europe.

As well, the decision helps the Commission coordinate closely with the U.S. Justice Department, which in July opened a "second request" in-depth probe of the deal.

The Commission has a four-month limit on its investigation imposed by law, while the Justice Department has no limit.

The latest round follows new legal action by Oracle last week in the United States.

Oracle revised a lawsuit against PeopleSoft Inc., warning PeopleSoft's customer rebate programs cost the company as much as $800 million in customer rebates.

PeopleSoft adopted the tactics of two rebate programs as a means of fighting against the takeover. Oracle has said that PeopleSoft's defenses would have to be stripped for it to proceed with its bid.

In its request to expedite the case, Oracle argued that it is suffering "direct irreparable harm" from PeopleSoft's money-back offers because they make it difficult to offer an attractive price to shareholders.