Oracle to Buy BEA for $8.5 Billion

Jan 16, 05:40 PM

The announcement before the stock market opened sent BEA's shares sharply up, closing 18.5 percent higher at $18.46 a share. Oracle closed slightly up at $21.92 a share, an increase of nearly 3 percent.

The agreement calls for Oracle to acquire all outstanding shares of BEA for $19.375 _ a hefty premium over the $17 a share Oracle originally offered, but less than the $21 a share that BEA's board of directors was demanding.

For that price, Oracle gets the company plus its $1.3 billion cash on hand. Oracle executives expect it to also boost the company's earnings; Safra Cruz, Oracle president and chief financial officer, said in a statement released Wednesday that Oracle expects the deal to add to Oracle's earnings "by at least 1 to 2 cents."

But analysts had noted that Oracle could use much of BEA's middleware technology, which is compatible with Oracle's Fusion software. Oracle CEO Larry Ellison said the addition of BEA products and technology "will significantly enhance and extend" Oracle's own suite of middleware products.

Alfred Chuang, BEA's chairman and CEO, said the transaction "is in the best interest of our shareholders. I am confident our innovative products, talented employees and worldwide customer base will be key contributors to the success of the combined company over the long term. We look forward to working with Oracle toward a successful completion of the transaction."

BEA came under pressure to sell after Wall Street investor Carl Icahn began acquiring shares in the company last year. He eventually became the largest shareholder. Originally, Icahn had agreed with BEA's rejection of Oracle's $17-a-share offer, then later began agitating for a sale at that price. But Icahn fell silent after signing a nondisclosure agreement and getting a close look at BEA's technology and financials.

"Both companies will do very well," said Trip Chowdry, managing director of Global Equities Research. He said BEA's social computing products will give Oracle an entry into that growing sector. Customers of BEA should be pleased, he said, "because they were wanting BEA to be bought by Oracle as 70 percent of Oracle database customers are also BEA's customers."

The deal is expected to close by the middle of this year, subject to BEA stockholder and regulator approvals.

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