Georgina Prodhan and Spencer Swartz
FRANKFURT/SAN FRANCISCO: German software giant SAP boosted its offer for U.S. retail automation software company Retek by 24 percent to $617 million in its bidding war with rival Oracle Corp.
SAP said it had made its "best and final offer" of $11 per share, up from its previous bid of $8.50. That trumped Oracle's unexpected bid last week of $9 per share for the small Minneapolis-based company.
Retek stock jumped on the Nasdaq to 13-month peaks, trading up more than 10 percent at $11.60 in afternoon trade in New York, as investors anticipated Oracle would counteroffer. Retek's stock has nearly doubled this year.
"Will Oracle come back? Yeah. I reckon they'll do it on Tuesday, when they present their results, if not before," said JP Morgan software analyst Kunal Dasgupta, adding that both companies could easily afford to pay more.
"It's a good acquisition but it's more about ego. It's small enough to be worth Larry's while to do it just to annoy SAP," he said, referring to the rivalry between Oracle Chief Executive and co-founder Larry Ellison and his SAP counterpart, Henning Kagermann.
Retek, with sales last year of $174 million, is small by revenue relative to Oracle and SAP, whose revenues are well into billions annually. Retek's software manages sales, inventory and supply-chain data for retailers.
But both companies are keen to raise their profile in the retail software vertical, where Retek is a top player. Many analysts see this as a growth area in an otherwise slow-growing software industry.
Oracle, which was not available for comment, had said its bid was also aimed at protecting its U.S. market share, though some analysts have questioned whether Oracle would be distracted buying Retek just two months after it bought PeopleSoft for $10.3 billion.
BIDDING BATTLE
An acquisition would give SAP or Oracle an opportunity to sell retail companies other software products that automate business processes like human resources and payroll as companies look to consolidate their technology infrastructure to cut costs by buying from fewer vendors.
Oracle, the top database maker, is SAP's closest rival in the business software applications market.
Retek said in the statement its board had unanimously recommended SAP's new offer to shareholders, and the companies raised the termination fee to be paid to SAP if the deal falls through to $25 million from $15 million.
SAP has 3.2 billion euros ($4.3 billion) in cash and equivalents and California-based Oracle has $5.9 billion.
"Oracle generates plenty of cash flow and the deal size is not that big. I would be surprised if Oracle doesn't bid above SAP's $11 offer," said Wedbush Morgan Securities analyst Nathan Schneiderman, who does not own SAP or Oracle stock.
SAP shares closed down 0.2 percent at 120.46 euros. Oracle was up 1.6 percent at $13.23 on the Nasdaq on Thursday afternoon in New York.