BEA Seeks $8.23 Billion From Oracle

Oct 25, 04:12 PM

Current Headlines: By Pete Carey, San Jose Mercury News, Calif.

Oct. 25--BEA Systems named its price today: $8.23 billion.

The San Jose software company broke the logjam that has stalled negotiations with Oracle of Redwood City with an offer to sell BEA to Oracle or any other buyer for $21 share.

That is $4 a share more than Oracle is offering, but lower than the $24 to $27 range that some analysts said Oracle could afford to pay for the San Jose maker of business system "middleware."

Oracle told the company October 9 that it would pay nearly $6.7 billion, or $17 a share. When BEA refused to sell at that price, Oracle made its offer public.

Since then, there has been a back and forth exchange of letters between the two companies, with no movement on either side. On Tuesday, Oracle gave BEA a deadline of Sunday at 5 p.m. to accept the offer.

Oracle declined to comment, but with BEA putting a price on the table, presumably negotiations will now begin in earnest. The development makes it more likely that BEA will be sold.

BEA's share price momentarily leaped above $18 in early trading this morning, but was trading at $17.72 by 11:33 a.m. Eastern Standard Time.

In a letter to Oracle, released this morning, BEA's directors said that Oracle's offer "significantly undervalues BEA, and is therefore not in the best interests of BEA shareholders." They said they will "continue to vigorously oppose a sale to Oracle at $17.00 per share."

The letter said that Oracle "has repeatedly asked us for the price at which we would be willing to begin negotiations, and the Board has concluded, after consultation with its financial adviser Goldman Sachs, that it is prepared to authorize negotiations with third parties including Oracle at a price of $21.00 per share."

BEA said it is ready to deliver "today" a draft merger agreement that it is prepared to sign at $21 a share.

The letter also noted BEA's leadership in business software and its deep customer base, including 75 percent of the Fortune Global 500 companies, growth opportunities in China and elsewhere and a balance sheet with more than $1 billion in cash and no debt.

BEA said a buyer could expect an earnings boost from acquiring BEA that would justify paying even more than $21 a share.

The company has been under pressure to sell by activist investor Carl Icahn, who has become the company's major shareholder, owning more than 13 percent of its shares. In September, Icahn increased his holdings to more than 8 percent and said that BEA's board should consider selling the company.

When Oracle announced its offer of nearly $6.7 billion, Icahn said he was "happy" with the development but believed the company was worth more. BEA's board has stuck with that line unanimously since the offer was made.

Contact Pete Carey at (408) 920-5419 or pcarey@mercurynews.com.

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