BEA Accepts $8.5 Billion Oracle Offer

By Jim Finkle, Reuters  |  Posted 2008-01-16 Print this article Print

Oracle won a three-month-long campaign to buy BEA Systems by raising its bid for the business software maker by 14 percent to $8.5 billion.

BOSTON (Reuters) - Oracle Corp on Wednesday won a three-month-long campaign to buy BEA Systems Inc by raising its bid for the business software maker by 14 percent to $8.5 billion.

Activist investor Carl Icahn, BEA's largest shareholder with a nearly 13 percent stake, said he supported the deal, one of last year's highest profile corporate takeover battles.

Icahn and BEA's board initially rejected Oracle, saying it undervalued the company, but no other buyers emerged even as BEA's investment bank, Goldman Sachs, solicited bids from other software makers.

The price that BEA finally agreed to, $19.375 per share in cash, represents a compromise between the $17 that Oracle offered in October and the $21 that BEA had demanded.

"It's a fair price. It's a good deal for Oracle. It's a good deal for BEA," said Trip Chowdhry, analyst at Global Equities Research.

Shares of BEA rose 19 percent to $18.59 in morning Nasdaq trade, while Oracle shares were down 2 cents to $21.29.

BEA is a maker of "middleware," which helps business computer systems interact with each other. Oracle could sell its technology alongside its own middleware, database products and business-management software.

Oracle said the deal, valued at $7.2 billion net of cash on hand of $1.3 billion, would increase its adjusted earnings per share by at least 1 cent to 2 cents in the first full year after closing, which is expected in mid-2008.

Icahn started accumulating a stake in BEA in August, when the stock traded as low as $11.02. He called on the board to put BEA up for sale, saying a bigger technology company would be able to boost revenue and profit.

Icahn had claimed that BEA was not worth as much to shareholders as a stand-alone entity as it would be to shareholders of a potential acquirer.

Jefferies & Co analyst Katherine Egbert said Icahn's argument particularly rings true amid signs the United States may be heading into a recession.

"In a recession, it is harder for smaller companies to compete," Egbert said. "Companies are more reluctant to buy from smaller companies in a recession because you have uncertainty."

(Additional reporting by Tiffany Wu; editing by Mark Porter/John Wallace)

Copyright Reuters 2007. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks or trademarks of the Reuters group of companies around the world.


Submit a Comment

Loading Comments...
eWeek eWeek

Have the latest technology news and resources emailed to you everyday.