Oracle Makes $6.7 Billion Bid For BEA

Posted by Floyd Marinescu on Oct 12, 2007

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Today Oracle confirmed that it has made a $6.7 billion dollar bid to buy BEA, according to various news media.  The offer is for $17 a share, a 25% increase over BEA's previous $13 a share price range.    Shares in BEA were trading at an avg of $13 before the announcement and are now trading at nearly $18 (as of 10:20am ET).

The offer was first made in a private letter to BEA's board delivered early this week.  According to Oracle's press release, The letter indicates that Oracle is prepared to proceed immediately to a process that leads to a definitive agreement. "We have made a serious proposal including a substantial premium for BEA," said Oracle President Charles Phillips. "We believe our all cash offer provides the best value for BEA's shareholders and the best home for BEA's employees and customers. This proposal is the culmination of repeated conversations with BEA's management over the last several years. We look forward to completing a friendly transaction as soon as possible."

As to the reason for the acquisition, Oracle commented:

The acquisition of BEA by Oracle will enable an increase in engineering resources that will in-turn accelerate the development of our world-class suite of middleware. Both Oracle and BEA customers will benefit from this increase in engineering investment as they migrate to modern SOA technologies.

Marketwatch is saying that the whole thing was engineered by investor Carl Icahn who owns a 13% voting stake in BEA and may come out with $200 million if the sale goes through:

In the meantime, from some back-of-the-envelope math, Icahn looks to pocket at least $200 million from the flip. The initial ownership stake of 33 million shares was presumably acquired at prices below $13, where BEA was trading in the days before the first SEC filing. The additional 18 million or so shares acquired in the days since would have been picked up in the $13 range.

Rueters reports that "So far BEA Chief Executive Alfred Chuang has rebuffed Icahn's proposal. Company officials have said that BEA doesn't intend to put itself up for sale."

A bidding war for BEA could emerge with SAP, according to Trip Chowdhry, managing director of Global Equities Research. CNN reports:

he believes there will soon be a bidding war for BEA between Oracle and its German rival, SAP,  that could take the price of BEA as high as $21. He said talk in the industry is that SAP has already made private bids for BEA to fill in gaps in its own line of product. He said Oracle is interested in buying BEA both to block its purchase by its key rival, as well as to enhance its own competitive position with companies such as IBM.

Oracle's bid follows a bid 4.8B euro bid by SAP for Business Objects the week before.

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