EU anti-trust opposition to Oracle’s (ORLC) acquisition of struggling Sun Microsystems (JAVA) has caused JAVA shares to fall well below Oracle’s $9.5 purchase price.
It also hasn’t helped that Larry Elison has been playing hard ball with the EU, refusing to make any concessions.
Thus many JAVA arbitrage traders have sold out of the stock. It’s now about 15% below Oracle’s offer price.
This is another ridiculous example of how the E.U., and more precisely one random European politician, Neely Kroes (The E.U.’s Competition Commissioner) is able to decide which American companies are allowed to join forces.
She has, as usual, over-reacted to competition concerns. If Sun is such a powerful collection of technology, then why has its stock fallen over the years? Long-term shareholders have been annihilated. It’s been value-destroying on its own.
So why is that when someone finally sees value in this otherwise dying company, and tries to unlock it and create value, the E.U. suddenly feels obliged to swoop in and declare the the merger uncompetitive?
The E.U.’s logic makes Sun the strange kind of company that is worthless on its own (It’s share price has fallen over the long-term) yet somehow at the same time infinitely valuable in combination with someone who tries to make make the company value-creating.
Regardless, Oracle seems pretty intent on making this happen, and even if they don’t, IBM (IBM) could always come back and make another offer for Sun (They made an offer for JAVA in the past). Wouldn’t it be hilarious if the EU then came in again and said that an IBM deal was unsuitable as well.
Please — someone has to introduce Neely Kroes to a new, time-consuming hobby, because otherwise she’s just wasting entrepreneurs’ time and money and preventing value creation. Let’s kick her out. Oh yeah, we can’t. She’s in Europe.
The author has long exposure to JAVA shares through a fund.