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10/25/2007
02:42 PM
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BEA Counters Oracle With $21 Per Share Demand

Oracle previously told BEA it won't be upping the offer and will withdraw by Oct. 28, if the BEA board of directors doesn't allow shareholders to vote on the bid.

BEA Systems on Thursday upped the ante to $21 per share in response to Oracle's bid to take it over. Oracle on Oct. 9 offered $17, or $6.7 billion for the company. At $21 a share, BEA is saying it's worth $8.23 billion.

"We continue to believe that Oracle's unsolicited proposal to acquire BEA at $17 per share significantly undervalues BEA and is therefore not in the best interests of BEA shareholders," said the firm's board of directors in a letter to Oracle.

Oracle previously told BEA it won't be upping the offer and will withdraw by Oct. 28, if the BEA board of directors doesn't allow shareholders to vote on the bid.

"My guess is they're not going to let BEA get away," said David O'Connell, analyst with Nucleus Research. "Oracle's investment banker is telling it to play tough, but I think they'll find a number in the middle."

"BEA is really a terrific catch for Oracle," he added in an interview. Its WebLogic application server, Tuxedo transaction processing monitor and AquaLogic business process management are all a natural fit for Oracle's application and middleware suite. Oracle would add BEA customers to its Fusion middleware customers and get a top notch middleware technology team, O'Connell said.

But it's still not clear that such a marriage is meant to be.

BEA has $1 billion in cash and no debt, noted the BEA board's response seeking $21 per share.

"Based on analysts' estimates of synergies in prior acquisitions by Oracle, the Board believes Oracle or other third parties could achieve earnings accretion in a BEA acquisition at levels well in excess of $21 per share," To dangle the bait closer to Oracle's nose, the BEA board noted that it had authorized its legal counsel, Wachtell Lipton Rosen & Katz to deliver today to any such third parties a draft merger agreement that it is prepared to sign... in exchange for $21 per share.

Said O'Connell of BEA's response: "I think they're playing it smart."

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