Oracle is at it Again

Retek is a relatively small software vendor that builds and markets applications for the retail space. Both SAP and Oracle covet it because it is the leading applications provider in a niche category. Furthermore, the retail segment has not spent a lot on the ERP software that Oracle and SAP offer. So both see Retek's customer base as a potential growth segment for their existing software. Both companies are eyeing Retek retail customers like A&P, GAP, Kroger, Best Buy, Abercrombie & Fitch and the Home Shopping Network.

The whole shebang started in late February when SAP made a bid for Retek of $8 per share. SAP probably thought it could swoop in and purchase Retek on the cheap because Oracle would be too busy swallowing PeopleSoft to notice. But one shouldn't underestimate Larry Ellison. On March 8th Oracle upped the ante by offering $9 per share to acquire Retek. Oracle announced that it had already begin to acquire share of Retek amassing more than 5.5 million outstanding shares already. This obviously will be an interesting battle!

Keep in mind that Retek earned $8.2 million on revenue of $174.2 million in 2004. They are not a large company. By mid-March Retek's stock was trading at over $10 a share. Then, on March 17th SAP boosted its bid, this time offering $11 a share.

Of course, this bid did not stand for long, as Oracle counterd by offering $11.25 per share for Retek. That is where things stand for now, but I don't expect that to be the end of it. (please see comment added below)

SAP has stated that its $11 bid was its last and final offer - and that might be the case. Retek's board of directors had previously recommended that its shareholders accept SAP's offer, but that was before Oracle's larger offer. And remember, Oracle already owns 5.5 million Retek shares, close to 10 percent of the 56 million total outstanding shares.

Whoever loses this battle will likely try to acquire Retek's closest competitor, JDA Software. JDA reported annual revenues of $216.9 million for 2004. Of course, the "loser" may also decide to look elsewhere for opportunities and try to acquire other complementary businesses (such as ETL or transaction processing for Oracle; EII or another application vendor for SAP).

But keep an eye on this one folks, it should be entertaining.