Oracle braced for EU objection on Sun deal

Oracle is braced for a formal objection from Brussels to its planned $7.4bn acquisition of fellow US technology company Sun Microsystems, escalating the company’s legal wrangle with Europe’s competition authorities.

The US software company has refused to offer any concessions to European regulators to meet their concerns about the deal, according to one person close to the process. That has left Brussels close to issuing an official statement of objections, the first step on the path to blocking it, this person added.

The complaint could come within days, but there is still a chance that one side or the other will back down, according to observers in Brussels. Neither side commented on Tuesday.

Some suggest that Oracle has little to lose by waiting to see Brussels’ precise concerns. It would then still have time to offer concessions or try to mount a legal fight, though this would inevitably be prolonged.

The European Commission last blocked a US merger when it intervened in General Electric’s proposed purchase of Honeywell in 2001, causing a transatlantic row.

Since then, regulators in Washington and Brussels have tried to co-ordinate their work more closely to avoid such disagreements.

The Commission rarely blocks deals outright. Between 1994 and 2003, the European commission blocked 21 mergers out of the 2,157 notified – an average rate of 1 per cent a year. Between 2004 and 2008, only two of the 1,665 deals notified have been barred.

The Sun acquisition has already been cleared by the US Department of Justice, in spite of the agency’s heightened attention under the Obama administration to antitrust issues, particularly in the technology industry.

Brussels has blocked only two proposed mergers since 2004, both of them involving European companies.

The EC first raised its concerns about the Sun acquisition two months ago, preventing Oracle from completing the deal. Since then Sun has said it will lay off 3,000 people, attributing the timing of that decision to the delay in Brussels.

The commission had no comment on Tuesday. But two weeks ago, commission officials confirmed that, in spite of ”repeated requests”, Oracle had neither provided them with evidence that the deal would not cause competition problems, nor discussed possible remedies.

With Sun’s sales under severe pressure due to the recession and the uncertainty about its future, people familiar with the state of its business have warned that longer delays could seriously jeopardise its survival.

Brussels’ concerns centre on Oracle’s assumption of MySQL, an open source software company that Sun acquired in 2008. Opponents of the deal claim MySQL could become a serious competitor to Oracle’s own core business in the long term.

Larry Ellison, Oracle’s outspoken chief executive officer, has challenged antitrust regulators in the past, having won a rare legal battle against the justice department’s attempt to block his purchase of PeopleSoft.

He said recently that Sun was losing $100m a month as Oracle waited for approval of the deal.

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