Although enterprise software giant SAP claimed to have signed “a definitive merger agreement” to acquire Retek, SAP’s arch-rival Oracle Corp. has made a counter offer roughly 6% higher than SAP’s for the provider of supply chain solutions to the retail industry. SAP offered $8.50 per share for Retek, while Oracle has upped the ante to $9.00 per share. Oracle has also purchased nearly 10% of Retek’s total shares outstanding.
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In fact, Oracle been engaged in merger discussions with Retek since October 2004, notes Charles Phillips, Oracle’s president. The two companies have worked together since 1986, Philllips points out, and approximately 80% of Retek customers use Oracle technology (presumably, Oracle’s database technology).
Not surprisingly, SAP reacted to Oracle’s counter-bid by issuing a press release stating, in part, that “as SAP offers superior interoperability with both Microsoft's .NET and the Java programming environments through its own integration and application platform, SAP NetWeaver, SAP is in a better position to offer Retek and SAP customers a swift and painless path to the integration of these and other third-party applications. SAP believes that integration at the applications level -- rather than at the database level -- is what will drive competitive advantage for companies looking to align their IT infrastructure in order to respond swiftly to changes in the fast-moving retail market.”
“Retek finds itself in an enviable position where two of the largest application vendors have started a bidding war for its acquisition, but the process could get nasty and emotional as time goes by,” observes Simon Bragg, with analyst firm ARC Advisory Group. “Oracle's tender acknowledges that the winner will enjoy a considerable advantage in the retail industry. The retail industry is beset by legacy bespoke systems, and is attractive to both suppliers of enterprise wide, scaleable applications."
“Expect a higher offer from SAP,” Bragg predicts, “as Retek is probably worth more to SAP than to Oracle. Oracle is busy integrating PeopleSoft into its organization, maintaining 3 product lines, and initiating Project Fusion. It may lack the resources to invest, build and exploit an additional industry solution. If Oracle were to lose, then SAP's lead might be difficult to challenge. SAP, is free from such diversions, and already has an established retail business unit. SAP will gain access to Retek's US customers, and will bring Retek's solution to its larger European retail base. However, after its experience investing in Commerce One, SAP won't pay inflated prices. If SAP were to lose, then it has the bandwidth and infrastructure to acquire and exploit other retail specialists.”