Oracle and BEA Lock Horns in Buyout Talks
Oracle and BEA Lock Horns in Buyout Talks
October 15, 2007: Oracle’s $US 6.4 Billion bid for enterprise software provider, BEA Systems has hit a snag in that BEA’s board of directors believe the bid is too low.
Content Management software provider, Oracle has offered $17 per share for competitor BEA systems, which is a 25% premium on its existing share price and works out to be a total of $US 6.4 Billion for the company ($AUS 7.1 Billion). According to a BEA spokesman, the proposal “significantly under-values BEA” and has caused the BEA board of directors to reject the bid and sparked a public relations war between the two.
The first salvo was fired by BEA, who publicly released a letter responding to the Oracle bid:
“BEA is worth substantially more to Oracle, to others and, importantly, to our shareholders than the price indicated in your letter.” Said William Klein, Vice President, Business Planning and Development, BEA.
Klein also outlined how the board believed the lack of internal financial reports means a public evaluation of BEA would be inaccurate, and BEA did not want to be involved in a long, open ended process that could harm its shareholders.
Oracle responded to BEA’s assault with a letter of there own:
“Our proposed price is a substantial premium to an already-inflated stock price that reflected speculation of the potential sale of BEA and represents a more than 40% premium to BEA's stock price before the appearance of activist shareholders in mid-August of this year.” Said Charles Phillips, Oracle President.
According to Phillips, BEA had agreed to a meeting to discuss the process and come to a definitive agreement before the open of business on Monday the 15th. This never went ahead as “BEA cancelled the meeting late last night and declined our invitations to reschedule” Phillips said.
Industry analysis of the deal has been intense and varied in speculation of the outcome, considering how key these two players are its hardly surprising that the deal is receiving so much scrutiny.
“BEA was bound to be acquired sooner or later and Oracle has always been one of the best positioned to do so. The timing of the acquisition is interesting. Oracle has waited to be in a position of strength before acquiring it. It has spent the past three years positioning itself aggressively against BEA on the basis of the integration between its database and application server, and an aggressive pricing strategy. More recently, when stating its quarterly results, it repeatedly stated that it had not just caught up but overtaken BEA in the infrastructure space, partly because of acquisitions.” Says Laurent Lachal, senior analyst at Ovum.
BEA’s shares have risen more then 38% as a result of the takeover speculation, closing at $US 18.80 per share at the close of business, well above Oracle’s share offer.
“On the other hand, BEA shareholders may now be open to an offer, especially if goaded by billionaire investor Carl Icahn, who recently increased his stake in BEA to 8.5% and asked for the company to be sold.” Lachal explained.