Oracle Clinches Difficult BEA Systems Acquisition - InformationWeek
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4/29/2008
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Oracle Clinches Difficult BEA Systems Acquisition

After an acquisition that began as borderline hostile, Oracle talks of the companies' shared vision for SOA and a strong partnership in delivering middleware products.

Oracle announced Tuesday it has completed its acquisition of BEA Systems following approval from the European Commission.

The acquisition brings "together two companies with a common vision of a modern SOA infrastructure," said Oracle president Charles Phillips, in a prepared statement. "Together, Oracle and BEA will provide a series of complementary and well-engineered middleware products, allowing customers to more easily build, deploy, and manage applications in a secure environment."

Such warm words about togetherness follow an acquisition process that began as anything but friendly. But in classic bartering fashion, they met almost exactly in the middle on the final price.

On Oct. 9, 2007, Oracle offered to buy BEA Systems for $17 a share, which at the time was 25% above BEA's share price. In a response letter made public, BEA's board wrote that "BEA is worth substantially more to Oracle, to others and, importantly, to our shareholders than the price indicated in your letter." The board stuck to its guns for weeks, even after Carl Icahn, an activist billionaire investor who owned about 11% of BEA's stock, pushed board members to accept the offer.

Oracle, in turn, made public its own letter signed by Phillips, which said BEA must accept its bid of $17 per share or it would withdraw the offer by Oct. 28. Oracle said it wanted to avoid "a long, drawn-out process to acquire BEA," which appeared to be another way of saying it was willing to get hostile and stick with it if for the long haul if necessary. But BEA's board let the $17-a-share offer expire, maintaining in a public letter that the price "significantly" undervalued the company.

Then BEA showed its hand. In a separate letter to Icahn in October, BEA said it would "immediately" accept an offer that valued the company at $21 per share.

On January 16, Oracle announced it had reached an agreement to purchase BEA Systems at $19.375 per share. In a letter to BEA Systems' customers that day, Phillips wrote that "Oracle intends to preserve and enhance customers' investments in BEA products as Oracle has done with its other acquisitions, while Fusion Middleware will continue to be the center of Oracle's current and future middleware and applications strategy. After the closing, BEA customers can continue to use their existing BEA products going forward, or choose to use Oracle and BEA products as part of the ongoing evolution of Fusion Middleware. Either way, it will be the customer's choice."

The U.S. Justice Department and Federal Trade Commission approved the acquisition in February, and BEA shareholders approved it April 4. The European Commission's approval was the final step required for completion of the acquisition.

BEA has a leading set of Java middleware products built around its WebLogic Java application server. It's the No. 2 market-share holder in middleware, according to IDC, with IBM ranked No. 1 and Oracle, No. 3. BEA also makes software for business collaboration--or "enterprise social computing"--and earlier this month announced upgrades to several applications within its AquaLogic product suite. Its third major product family is BEA Tuxedo for transaction process monitoring.

BEA's middleware technology also is expected to augment Oracle's offerings in business intelligence software, particularly in the area of products and services for accessing transaction data for analysis in real time.

The pace of Oracle's acquisitions this year, for the most part, are on pace with past years. The BEA acquisition is its third this year, following Captovation and technology from Empirix. It completed 11 acquisitions last year, and 13 each in 2006 and 2005.

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