3rd UPDATE: EC Issues Objections To Oracle-Sun Deal
(Updates with more background.)
By Jerry A. DiColo and Jessica Hodgson
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- The European Commission raised objections to Oracle
Corp.'s (ORCL) proposed $7.4 billion acquisition of Sun Microsystems Inc. (JAVA)
, drawing rebukes not only from Oracle but also from the U.S. Department of
Justice.
The EC issued a statement of objections--a formal charge sheet spelling out
its concerns--due to worries about the merger's potential negative effects on
competition in the database market.
According to a filing by Sun Micro with the Securities and Exchange
Commission, the EC's statement is limited to Sun's open-source MySQL database
software and its potential combination with software sold by Oracle.
The EC's position rankled officials at the U.S. Department of Justice, which
already has approved the deal. In a statement responding to the EC news, the
department's antitrust division said the merger is "unlikely to be
anticompetitive."
Oracle, meanwhile, said the acquisition "does not threaten to reduce
competition in the slightest."
"The Commission's Statement of Objections reveals a profound misunderstanding
of both database competition and open source dynamics," the company said in a
press release.
The EC's concerns with the merger may not impact the deal's timetable for
regulatory clearance; however, the move indicates that the regulator has some
serious worries about the deal and points to an increasing likelihood that the
authority may ask for divestitures or other remedies as a condition for
approval, people familiar with European law say.
The European Commission has to rule by mid-January whether it will clear or
block the deal. Most legal experts think it's unlikely that the deal will be
blocked outright. Sun noted in its filing that the document is preliminary and
that the companies will be able to respond before a final ruling.
The statement of objections isn't the first time the EC has weighed in on
deals that have already met muster with U.S. regulators. In 2001, European
regulators scuttled General Electric Co.'s (GE) $40 billion plan to purchase
Honeywell International Inc. (HON) in 2001, even though the deal had received
the Justice Department's blessing.
At that time, the Justice Department issued a statement saying European
regulators' decision to block the deal "reflects a significant point of
divergence" from U.S. policy to protect competition, not competitors.
The EC's action isn't the first time it has targeted Oracle. In 2004, the EC
sent the database maker a list of objections to its hostile bid for PeopleSoft
Inc. The deal was eventually completed.
A growing number of hurdles to the Oracle-Sun deal's closing appears to be
weighing on Sun's stock. In after-hours trading, Sun shares recently traded at $
8.25, below Oracle's$9.50 offer price. Oracle shares slipped 4 cents to $21.79.
The EC regulators launched a probe in September, citing "serious concerns"
about the deal's potential impact on the database market. Regulators have since
expressed frustration that Oracle hasn't provided enough evidence to show why
they should clear the deal.
Executives for Oracle and Sun have said the delay over closing deal is costing
them money. In a recent speech in Silicon Valley, Oracle's chief executive,
Larry Ellison, said Sun was losing around $100 million a month due to the delay.
Competitors like International Business Machines Corp. (IBM) and Hewlett-Packard
Co. (HPQ) have been trying to capitalize on the uncertainty by luring away Sun's
customers.
The Justice Department, despite the disagreement on the Oracle-Sun deal, said
it has "enjoyed close and cooperative relations" with the EC.
"The antitrust division will continue to work constructively with the EC and
competition authorities in other jurisdictions to preserve sound antitrust
enforcement policies," said Molly Boast, deputy assistant attorney general of
the department's Antitrust Division.
-By Jerry A. DiColo and Jessica Hodgson; Dow Jones Newswires; 212-416-2155;
jerry.dicolo@dowjones.com
(Kevin Kingsbury and Andrew Morse contributed to this report.)
(END) Dow Jones Newswires
11-09-092039ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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