Oracle Ups Bid for Retek - Will SAP Raise Again?

Oracle (Nasdaq: ORCL) bumped up its bid to acquire Retek late yesterday, in the second round of its battle with SAP (NYSE: SAP) for the retail applications developer.

The move was expected, but the new offer, US$11.25 per share to SAP's $11, was lower than the $12 Gartner (NYSE: IT) analyst Andrew White predicted yesterday. At the new high bid, Retek's value is up to $631 million. Oracle originally bid $9 to top the $8.50 SAP had offered Feb. 28.

"It looks like a signal that Oracle is saying, 'We think we are paying enough for Retek, but whatever you (SAP) will do, we'll top it,'" White told CRM Buyer in an e-mail. SAP called its last bid final, "but that can be posturing as well," White said.

Will SAP Counter?

Whether SAP will come back with another bid is difficult to predict. The company does not have as much to lose by surrendering Retek, although Evan Quinn, group vice president for applications at IDC, suggests that the bidding war involves more than just retail applications market.

"Undoubtedly both firms have a ceiling price, but one would have to think that if SAP was willing to pay $11 per share, they probably would be willing to pay $11.50 or $11.75 a share," he told CRM Buyer. "It is hard to believe the price will go too much higher, but this does have the overtone of a grudge match."

Non-Monetary Motivation

According to analysts, Oracle CEO Larry Ellison may sometimes sound reckless, but he's unlikely to allow the battle to get the better of him.

"Despite Mr. Ellison's often colorful remarks, in actuality Oracle is quite a conservative firm fiscally speaking. Oracle certainly would like to land Retek but will not pay a punitive price," Quinn said. SAP, in fact, may be more motivated by emotional factors. "Though SAP would like to land Retek as well, SAP might also glean a little satisfaction by forcing Oracle to pay several hundred millions of dollars more for Retek than Oracle might have wanted."

White has a different take on what will happen next.

"We do not expect it," he said about another bid. "If SAP does, there are two scenarios: SAP still thinks it can push Oracle to spend more money on the deal and so a small counter-bid, say $12, would force Oracle [to bid] again. Or, SAP may still think that it really can push Oracle out of the way, given the support from the Retek board [which endorsed SAP's $11 bid Thursday before Oracle's counter]. That would favor a slightly higher bid -- to give the Retek board more reason to distance themselves from ever supporting the Oracle bid. But we do not think there will be another SAP bid. Either way, it will be fun to see the next step."