Oracle Offers BEA $6.7 Billion; A Hostile Takeover?

Oracle is bidding to take over BEA Systems, the No. 3 middleware supplier, for $6.7 billion. The announcement made public Friday has some of the earmarks of a hostile takeover, like Oracle's ultimately successful but protracted bid to take over PeopleSoft.

And a possible intervention by German applications rival SAP can't be ruled out.

BEA has a leading set of Java middleware products, built around its WebLogic Java application server. If SAP acquired BEA, it would both frustrate Oracle's ambition to own a larger share of the Java middleware market and give SAP a platform with which to match Oracle's Java-based products. SAP has been struggling to win marketplace acceptance of NetWeaver, an SAP-technology based alternative to Java middleware.

Oracle's offer is 25% above the market value of BEA Systems based on its closing share price Thursday of $13.62. Oracle is offering $17 a share.

The offer comes at a sensitive time for BEA. Investor Carl Icahn has picked up a 13% stake in BEA, while calling for its sale to a strategic acquirer. Oracle, with its combined database, applications, and middleware product lines, would be such an acquirer.

"This proposal is the culmination of repeated conversations with BEA's management over the last several years," said Oracle president Charles Phillips in an announcement of the bid.

Oracle had delivered a letter to the BEA board of directors making the offer four days earlier. The lack of public comment by BEA on the offer so far could be an indication that the company's directors believe the bid can be improved through negotiation or outright resistance. BEA officials did not respond to InformationWeek queries by press time.

BEA officials have stated that the company is in the midst of restating its quarterly earnings over a 10-year period ending with fiscal 2007, because of stock option dating inconsistent with its financial reports.

Oracle's letter stated: "We believe our all-cash offer provides the best value for BEA's shareholders. ... We look forward to completing a friendly transaction as soon as possible."