Oracle has won its bidding war against German software rival SAP to acquire retail management software developer Retek.

Oracle and Retek have signed a definitive merger agreement that will see Oracle acquire the company for US$11.25 per share, Oracle said, equivalent to about $630 million. SAP confirmed that it had dropped out of the bidding, saying it chose to exercise "financial discipline."

The bidding war had been closely watched thanks to the rivalry between SAP, the world's largest business applications vendor, and Oracle, which became number two in the market in January when it completed its hostile takeover of PeopleSoft.

Retek sells a variety of retail-focused applications, including software for operations management, supply chain planning, merchandising and demand forecasting. It has about 550 employees and reported a profit of $8.2 million for 2004, on revenue of $174.2 million.

The acquisition strengthens Oracle's footing in the retail applications business, where it was not seen as a particularly strong player. The company was also keen to buy Retek in order to keep its lead over SAP in the North American market, where it has more customers, said CEO Larry Ellison.

The retail industry remains strategically important to SAP, which has 2,400 retail customers, said the German company. But it was not prepared to take part in a battle that would have driven Retek's price unreasonably high, it said.

"We concluded that neither our shareholders nor retail customers would benefit from an auction process that would further inflate the purchase price, and in the long run, not deliver the returns we demand," Henning Kagermann, SAP's CEO, said.

SAP was first to bid for Retek late last month, offering $8.50 per share. Oracle countered a week later with an offer of $9 per share. SAP then made what it said would be its final bid, offering $11 per share. Oracle has now trumped that with $11.25 per share, apparently ending the battle.

The price Oracle has agreed to pay is below Monday's closing price of $11.46 for Retek (RETK) shares on the Nasdaq stock market, but well above the $6 at which Retek's shares were trading in late February before SAP made its first offer.

Oracle had already been in talks to buy Retek earlier in the year, Ellison said earlier this month, but was too distracted by the fight over PeopleSoft to make a deal.

According to Oracle, nearly 80 percent of Retek's customers run their applications on Oracle's databases.

Marty Leestma, Retek's president and CEO, called Oracle's offer a good deal for Retek's shareholders. The company will work with Oracle over the coming weeks to avoid disruption for Retek's customers, he said.