The judge presiding over the US Department of Justice's (DoJ) attempt to block Oracle's proposed takeover of rival software maker PeopleSoft has ruled in Oracle's favour, removing one obstacle preventing the hostile acquisition.
The decision means Oracle's 15-month campaign to buy PeopleSoft through a $7.7bn (£4.3bn) cash tender offer to PeopleSoft's shareholders will continue.
The DoJ failed to prove that a takeover of PeopleSoft by Oracle would be anti-competitive, the judge wrote in his 164-page ruling.
"Because plaintiffs have not shown by a preponderance of the evidence that the merger of Oracle and PeopleSoft is likely substantially to lessen competition in a relevant product and geographic market ... the court directs the entry of judgment against plaintiffs and in favor of defendant Oracle," the judge wrote. He stayed his order for 10 days to permit the DoJ to seek an appeal.
The DoJ is disappointed by ruling, assistant attorney-general Hewitt Pate said in a statement. "The department is considering its options," he said.
The decision is a setback for PeopleSoft and a significant blow to the DoJ, but it is far from a green light for Oracle. From the start, the biggest obstacle to the deal has been PeopleSoft's "poison pill," an anti-takeover provision in its bylaws that allows it to manipulate its shares to make a hostile acquisition prohibitively expensive.
Oracle is challenging the legality of PeopleSoft's poison pill; trial on that case is scheduled to start on 27 September.
Oracle in a first reaction to the ruling said that it removes a significant roadblock to the acquisition. "This decision puts the onus squarely on the board of PeopleSoft to meet with us and to redeem its poison pill so that the shareholders can accept our offer," Oracle chairman Jeffrey Henley said.
PeopleSoft in a statement said its board of directors will review the implications of the ruling. However, it said its board had already considered and unanimously rejected each of Oracle's offers as inadequate.
Oracle began its pursuit of PeopleSoft in June last year. The DoJ sued Oracle in February on antitrust grounds, charging the proposed acquisition would eliminate one of only three players in the market for financial management and human resources software sold to large businesses.
Another obstacle facing Oracle in its continued quest for PeopleSoft is convincing PeopleSoft's shareholders to take advantage of the buyout offer. Oracle is offering $21 per share.
At the end of Thursday, about 26.5 million shares, or 7.2% of PeopleSoft's outstanding shares, had been tendered into Oracle's offer, the company said.
Oracle and PeopleSoft also remain locked in another legal battle, where PeopleSoft has charged Oracle with unfair business practices.
Oracle countered with a complaint accusing PeopleSoft of illegally refusing to seriously evaluate Oracle's bid, and of improperly creating a "customer assurance program" that could make an Oracle acquisition of PeopleSoft very costly for Oracle. The case is schedule for trial in November.
Stacy Cowley and Joris Evers write for IDG News Service