Last updated: September 24, 2004 12:16 am

EU set to clear Oracle $8bn bid for PeopleSoft

The European Commission is set to clear the $7.7bn hostile takeover bid by Oracle for rival software group PeopleSoft in a move that is likely to pave the way for the creation of a new US software giant.

Mario Monti, the European Union competition commissioner, is expected to announce the clearance before he steps down at the end of next month. Though he still has to consult the EU's national antitrust regulators, it is unlikely that he will change his position.

People familiar with the case said the Commission had been leaning towards a clearance of the offer for months, long before a US court approved the bid in early September. They said the Commission was still concerned about the possible impact of the takeover on competition but it had realised its case would not withstand a legal challenge in the European court.

It is understood a merger prohibition had been opposed by the Commission's powerful legal services, a team of elite lawyers that scrutinises important decisions.

If confirmed, the move would end fears of a transatlantic rift in antitrust policy.

Though the US justice department had argued in favour of blocking the move, its stance was overturned by the US district court in San Francisco. The ruling could still be appealed, but if it is allowed to stand, a prohibition by Mr Monti could have led to the politically sensitive situation of a major bid being cleared in the US and blocked in the EU.

Last time this happened when Mr Monti blocked a merger between General Electric and Honeywell three years ago the Commission was criticised by the US business community.

A replay of such animosity looks unlikely. That will be welcome news to Neelie Kroes, who takes over as EU competition commissioner in November and who would have faced the fallout if Mr Monti prevented the bid. The Commission's investigation into the bid is now frozen, but Brussels is expected to reopen it within the next week. Under EU merger rules, the Commission then has about four weeks to make a formal decision.

The news will further dent PeopleSoft's efforts to reassure the 15,000 attendees at its annual customers' conference in San Francisco this week that it has a fighting chance of remaining independent.

The software company has already blamed publicity around the legal case in the US for scaring away potential customers during the second quarter of the year, and yesterday it appeared to signal that another big drop in sales was likely in the latest three months.

With only a week left to go in the quarter, PeopleSoft said its new application licence revenues had topped those seen in Oracle's most recent quarter.

However, Oracle's sales reached only $69m, far short of the $160.5m that PeopleSoft achieved in the same period a year ago, suggesting that PeopleSoft is less than halfway to meeting its own sales figure for the 2003 quarter.

Oracle has already cut the value of its offer for PeopleSoft once this year to reflect PeopleSoft's declining fortunes, reducing its bid by 20 per cent to $7.7bn.

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