Time Runs Out on Oracle Bid For BEA

UPDATED: BEA Systems’ stock opened this morning at $16.70, dropping from its position of over $18 a share last week, as Oracle’s bid to buy the company at $17 per share expired yesterday.

BEA issued a statement on Friday restating its rejection of Oracle’s offer. “As we have stated repeatedly, your $17.00 per share proposal is unacceptable to the Board of Directors of BEA Systems,” stated the letter from BEA vice president William Klein.

Oracle issued its own statement on Sunday, withdrawing its bid but not ruling out future offers for the company. However, the statement read, “BEA shareholders should not assume that Oracle will renew its $17 per share offer in the future. Over time many things can change: BEA’s business might materially weaken, the stock market can fall further from its recent record highs, or Oracle may have committed its capital elsewhere.”

Turning to BEA’s shareholders, the Oracle statement read, “If the BEA
shareholders are unhappy with the behavior of the BEA Board it is up
to those shareholders, not Oracle, to take the appropriate action.”

“As fiduciaries, our board cannot endorse a proposal that it has concluded significantly undervalues BEA. We therefore assume that your proposal will expire on October 28.”

And at least one shareholder is taking action. Carl Ichan, who owns 13.22 percent of BEA’s outstanding shares, demanded a shareholder vote on Oracle’s offer over the weekend, and said in a statement that he has moved to file a lawsuit against BEA to force a shareholder meeting “before any scorched earth transactions” occur.

Icahn, famous as a corporate raider and takeover specialist, first
revealed his stake in BEA on Sept. 14 when he took an 8 percent
share in the company.

“I can’t imagine he’s very happy with this
outcome,” said Forrester analyst John Rymer. “I don’t think this is
over yet. You have some every powerful shareholders at BEA who want
it to be sold so they can take their profits.”

Now, as the controversy over BEA’s handling of the offer continues,
the company still faces the business issues that made it a target for
acquisition, along with the potential impact on their business of
Oracle’s offer.

BEA is one of the few remaining independent
application server vendors in a market that has become viewed by
customers as commoditized.

“Our sense was that the business was not
growing at interesting rates and may have been flat,” said Rymer.
“The only way they’re getting revenue growth is through their
maintenance line.” Oracle pointed out BEA’s lack of growth in
software license sales in its justification of its offer price, he

BEA, meanwhile, continues to develop its long-term strategy around
Project Genesis, its roadmap for future products around business
process management (BPM), social-networking technologies and
integration through a service-oriented architecture (SOA). In the
short term, the main impact will come if customers canceled sales.

During the first few quarters of Oracle’s quest to acquire PeopleSoft, PeopleSoft’s sales were quite good, said Rymer. “So
it’s not inevitable that BEA’s customers stopped buying. But we won’t see
until they announce their numbers for the quarter.”

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