The bidding battle for Retek Inc. appears to be entering the end game with at least one analyst concluding that Oracle Corp. is poised to wrest the retail software vendor from SAP's clutches.
Oracle's latest bid of $11.25 a share -- which topped SAP's sweetened offer by 25 cents a share -- could be considered excessive since Retek only generated $174 million in revenue last year, analysts said. To get back in the bidding, SAP would need to top Oracle $631.4 million offer, a price that would be $135.4 million more than its initial $8.50-per-share cash tender, which at the time already represented a 42% premium for Retek. That may be too rich a price for SAP, analysts posited, given the company's proclivity towards fiscal prudence.
In a research note cited by CBS MarketWatch, investment banker Bear Sterns told clients it expects SAP to walk away from the Retek deal. The rationale: overpaying for Retek could possibly inflate the valuation of other acquisitions.
An SAP spokesman declined comment on the matter.
In making its sweetened $629 million bid last week, SAP said the 29% premium on the table was its "best and final offer." The company also repeated what it said following its initial bid: Retek's board of directors had unanimously approved the offer, which expires on April 1.
To terminate the agreement, Retek must pay SAP $25 million, $10 million more than it initially agreed to. Retek did not respond to a phone inquiry by press time.
Oracle's interest in Retek is clear. Retek's applications ride on Oracle database technology. If SAP were to acquire Retek, its NetWeaver architecture could allow the company's accounts to easily replace their underlying databases with non-Oracle products (SAP has said it remains committed to being database agnostic and would not lock out customers from any technology choice.). This could potentially hurt Oracle's competitive position in the retail market, underlining why the company is willing to outbid SAP for Retek.
Oracle, moreover, would like nothing better than to beat back SAP's assault on the fragmented retail space, a market it too covets. Acquiring Retek, for example, would help Oracle solidify its position with Retek's 200-plus customers, which include high-profile accounts such as Best Buy, The Gap and Nordstrom Inc. Like SAP, Oracle sees opportunity in helping retailers and manufacturers work more collaboratively by using a unified applications architecture to track raw materials and product demand from the supply chain through the store shelf.
In disclosing its latest offer for Retek, Oracle said the deal would help it to protect its share of the North American enterprise applications market. "Customers have told us they want Oracle to buy Retek," said Oracle Chairman and CEO Larry Ellison, in a prepared statement. "Retek's applications are built on Oracle's technology platform. And Retek and Oracle share a vision of applications built using industry standards like Java, not proprietary programming languages like SAP's ABAP."
Previously, SAP said NetWeaver will offer Retek customers "a faster and less painful path" toward true application integration for systems built on both Microsoft's .NET and Java.
Oracle got into the bidding for Retek just after SAP announced an agreement to acquire the company. Oracle, in fact, purchased 5.5 million shares -- or almost 10% of Retek's common stock -- days before it made an unsolicited offer for the retail applications software vendor.