Oracle Bids Against SAP for Retek

IDG News Service - One week after SAP AG agreed to buy retail management software maker Retek Inc. for $496 million, Oracle Corp. swept in with a higher counteroffer in an attempt to snatch the company away from its ERP rival.
In a move reminiscent of its bitter campaign for control of PeopleSoft, Oracle launched its bid via press release. On Tuesday, it sent Retek's board of directors a letter that was also released to the media, in which it offered $9 per share in cash, trumping the $8.50 per share that SAP had agreed to pay. Oracle's offer amounts to about $525 million.
Officials at Retek didn't respond to requests for comment on the tug of war the company has been thrust into; SAP said it's waiting for Retek to respond to Oracle's offer.
Retek observers said that although Oracle's tactics were surprising, its bid was not. "It was the industry's worst-kept secret that Oracle was interested in Retek for probably the past year," said Forrester Research Inc. analyst Noha Tohamy. "Oracle got a little too busy with PeopleSoft. They took their eyes off the ball, and SAP did this preemptively."
The prize Oracle and SAP are tussling over is Retek's customer base of 200 retailers and its portfolio of retail supply chain, demand forecasting and operations management applications. It's a market where Oracle has little presence and where SAP has been trying to build one for several years, with little success.
A Better Fit?
In fact, because the companies have very little product overlap, Oracle would be the better fit for Retek, according to analysts. Oracle said Retek's software could be quickly slotted into its Oracle E-Business Suite. SAP, on the other hand, would need to rationalize significant functionality redundancies between its products and Retek's.
Smith Barney analyst Tom Berquist said in a research note that Oracle's tighter integration with Retek's applications and its stronger presence in the retail ERP market make it a better partner for Retek than SAP would be. He questioned Oracle's handling of its bid, however. Since Oracle and Retek had previously discussed a buyout, Oracle was presumably given a chance to top SAP's offer and declined, Berquist speculated.
"Given [Oracle's] words and actions indicating that it intends to pursue a significant number of major acquisitions over time, potential acquisitions targets may be unlikely to take Oracle's initial 'final offer' at face value, given the company's precedent for raising its bids above these levels," he wrote. "As a consequence, potential targets may increasingly try to find other bidders to play off of Oracle." Oracle itself has revealed many of its targets, such as BEA Systems Inc.
Analysts agreed that whichever suitor wins, Retek customers will likely be better off than they have been with the financially struggling company operating independently.
"A combined company will bring much-needed capital," AMR Research Inc. said in its analysis of the offers.
Cowley is a reporter for the IDG News Service.