Oracle Bid for BEA Expires: HANDLING OF OFFER ANGERS ICAHN, BEA's BIGGEST SHAREHOLDER

Oct 29, 04:14 PM

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

Oct. 29--The possible sale of San Jose software company BEA Systems took a dramatic turn Sunday, as Oracle let its offer expire while BEA's largest shareholder blasted the company's board for the way it has handled the takeover offer.

Oracle withdrew its offer for BEA at 5 p.m. Sunday.

"BEA shareholders should not assume that Oracle will renew its $17 per share offer in the future," the company said in a news release. "Over time many things can change: BEA's business might materially weaken, the stock market can fall further from its recent record highs, or Oracle may have committed its capital elsewhere."

Oracle noted that over the past 20 days, BEA's board "has repeatedly rejected our offer and refused to meet with us, even though we offered to meet without any preconditions."

"We asked the BEA Board to allow their shareholders to vote on our $17 per share proposal. They chose not to. If the BEA shareholders are unhappy with the behavior of the BEA Board, it is up to those shareholders, not Oracle, to take the appropriate action."

BEA did not comment. The company insists that Oracle's offer of $17 a share, or nearly $6.7 billion, is too little for the maker of so-called "middleware" software for businesses. BEA wants $21 a share, or $8.23 billion.

But BEA now finds itself at odds with Oracle and Carl Icahn, its largest shareholder and a billionaire activist investor known for buying shares of undervalued companies

and pushing his own agenda. He sent an e-mail thunderbolt from his offices in New York, blasting the board for its unwillingness to negotiate with Oracle.

Icahn said late Friday that he is suing BEA's board to force it to ask shareholders to approve any dramatic changes such as a sale of assets that might get in the way of a takeover of the company. He also demanded the company conduct an auction and allow shareholders to accept or reject the highest bid.

Icahn has been accumulating a stake in BEA, and now is its largest stockholder with more than 58 million shares, or about 13 percent. He has pushed BEA to sell, though when Oracle offered $17 share he said he thought BEA could get more. But no longer.

In a letter e-mailed to BEA's board of directors, Icahn accused it of refusing to negotiate. He also assailed board members for an options accounting problem the company is working to settle with the Securities and Exchange Commission, as well as declining revenue for software licenses.

Icahn told the board it should not to allow Oracle's bid to disappear.

"If a topping bid arises, then all the better," Icahn wrote. "But if no topping bid arises it should be up to the BEA shareholders to decide whether to take the Oracle bid or remain as an independent Company -- not THIS Board."

BEA came into play recently after Oracle set its eyes on the company, which makes a computer middleware that would help Oracle become a one-stop shopping place for business systems software.

BEA's middleware runs on large corporate computing systems and, for the majority of its clients, in tandem with Oracle's applications. BEA's middleware helps make sure databases get updated across networks.

BEA's stock has been depressed by the options accounting problem and three quarters of flat or declining licensing sales. The bid for the company sent the stock rocketing from $13.62 a share to just above $18. Then, with the stalemate between Oracle and BEA over the value of the company, it dropped back to a $16.50 close Friday.

Things got off to a nasty start Oct. 12 when Oracle disclosed its $17 a share offer and accused BEA of canceling a promised meeting to work out a deal. BEA said there was no such meeting promised or scheduled.

BEA called the offer unsolicited, but Oracle claimed there was an agreement to reach a deal by Oct. 15, based on prior negotiations. Rebuffed, it made its offer public.

At that point, Icahn issued a statement that he was "pleased" with Oracle's offer but thought the company was worth more.

Oracle held firm, drawing a line with the Sunday deadline.

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

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