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Oracle Threatens to Walk Away from BEA Deal

BEA Systems appears determined to stave off Oracle's $6.7 billion acquisition offer. In addition to refusing Oracle's reiterated bid today, BEA also shrugged off Oracle's threat to abandon the deal.

BEA's response represents the latest salvo in an ongoing communications battle between the two companies over Oracle’s unsolicited buyout offer, and comes after Oracle yesterday issued what amounted to an ultimatum.

"Oracle has no interest in a long, drawn-out process to acquire BEA," Oracle president Charles Phillips wrote yesterday in a letter to BEA's board of directors. "If the BEA board refuses to execute an acquisition agreement and refuses to let their shareholders vote, then our $17 per share proposal to acquire BEA will expire at 5 p.m., PDT, on Sunday, Oct. 28, 2007."

That threat, along with a restatement of Oracle's original offer, today seems to have fallen on deaf ears.

"As we have previously informed you, the BEA Systems Board of Directors is unanimous in its view that your unsolicited proposal to acquire BEA at $17 per share is not in the best interests of BEA shareholders," wrote William Klein, BEA’s vice president for business development, in the company's response today. "BEA is worth significantly more than $17 to Oracle, to others, and most importantly to BEA shareholders ... If Oracle is genuinely interested in acquiring BEA, you are fully capable of proposing a reasonable price to the BEA Board or taking any offer you wish directly to BEA shareholders."

The letter did not rule out an acquisition by Oracle per se, but faulted the database giant for not undertaking a "reasonable process" to determine BEA’s value as a company.

Shares in BEA closed at $17.87 today. However, determining the actual value of the company would be difficult because of BEA’s ongoing investigation into stock options grants and the resulting delay of its financial statements. Oracle, naturally, has always maintained that its offer represents a "generous" valuation of the company.

"Oracle believes that our $17 per share price is generous and there are no offers for BEA above $17 per share," Phillips said in his letter yesterday. The offer price, he pointed out, is a "21 percent premium to BEA's closing price of $14.05 on the date Oracle made its proposal; a 31.5 percent premium to $12.93, the 52-week average before our proposal; [and] a price higher than BEA's 5-year high before our proposal."

While Oracle has been successful in past difficult acquisition battles, the most infamous of which was its 2004 takeover of PeopleSoft for $10.3 billion, Phillips' letter suggested that Oracle wishes to avoid a protracted bidding war.

However, it is doubtful that other suitors for BEA will emerge anytime soon. SAP's recent acquisition of Business Objects may have taken Oracle's largest direct competitor out of the race.