Officials in the US Department of Justice (DoJ) antitrust division have blocked the proposed acquisition of PeopleSoft by rival Oracle, according to PeopleSoft.

The staff recommendation has been submitted to the office of the assistant attorney general, and the DoJ will make a final decision no later than 2 March, the software company added.

It made no further comment regarding the recommendation and Oracle did not deny the report, but it has stressed that it does not represent a final decision. "This process is simply not complete," said James Rill, Oracle's lawyer. "I have seen many instances in which the assistant attorney general's decision differed from that recommended by the investigating staff. In my experience, the assistant attorney general will take ample time to review the facts of this situation with an open mind and meet with Oracle before coming to a decision on the matter."

The announcement comes a few days after Oracle upped the stakes in the eight-month-old takeover battle by increasing the offer to $9.4 billion (£5bn), and just one day after Oracle CEO Larry Ellison appealed in a letter to PeopleSoft stockholders to allow him to use their proxy votes to gain representation on PeopleSoft's board at that company's annual general meeting on March 25.

Oracle originally offered to buy PeopleSoft - a competing maker of enterprise software - in June 2003, for $16 per share, or $5.1 billion, a figure that rose after PeopleSoft's acquisition of JD Edwards.

In his letter, Ellison said that PeopleSoft's board is not acting in the best interests of its shareholders. "The PeopleSoft Board continues to refuse to meet with us to discuss the merits of the transaction despite the fact that our offer represents a premium of approximately 19 percent over PeopleSoft’s closing price," Ellison wrote. "The independent candidates (for the board) nominated by Oracle believe that the stockholders - the owners of PeopleSoft - are entitled to make a decision on whether or not to accept Oracle's offer."

Oracle also said PeopleSoft had initiated the idea of the two companies working together. "The initial proposal to merge PeopleSoft's applications business with Oracle's applications business came from PeopleSoft CEO Craig Conway, who proposed that he was the best person to run the combined companies' applications business and never mentioned any antitrust concerns," said Oracle spokesman Jim Finn.

Oracle has been trying to get more than half of PeopleSoft's 361 million shares tendered, but just before the latest price offer in early February had only secured 10.6 million shares, or 2.9 percent of PeopleSoft's outstanding shares.