BEA To Oracle: Cough Up $8.2 Billion

Oracle offered 12 days ago

Oracle has repeatedly asked BEA's board to set a price at which it would consider a sale. The $21 figure, set in consultation with BEA advisor Goldman Sachs, values the company at around $8.2 billion. That sum is a hefty premium over BEA's valuation on the New York Stock Exchange, where its 52-week high of $18.94 came the day Oracle publicized its surprise acquisition bid. In its last fiscal year, BEA turned a profit of $142.7 million on revenue of $1.2 billion.

Oracle wants to add middleware maker BEA Systems, one of the largest independent software vendors left in the IT industry, to its growing collection of acquired software. Oracle, based in Redwood Shores, Calif., has done an unexpectedly good job integrating the dozens of companies it bought over the past few years: both customers and partners of acquired companies like PeopleSoft and Siebel have generally stuck with Oracle and praised its attentiveness to their needs. Oracle's North America channel chief, Rauline Ochs, landed this year's VARBusiness Channel Executive of the Year laurels.

But signs of strain are showing in Oracle's applications division, which has the daunting task of melding Oracle's hodgepodge collection of homegrown and acquired applications into a new, functionally converged line, "Fusion." Although the first Fusion applications are slated to begin rolling out in 2008, the project just lost its longtime leader: Oracle applications head John Wookey left the company last week, without either side commenting on his reasons for departing.

BEA partners are resigned to an Oracle takeover, which many viewed as inevitable. One of the top companies in the application server market, BEA is a specialist in a software industry increasing consolidating around "full service" vendors able to offer end-to-end technology stacks, like IBM, Microsoft and Oracle. Along with Business Objects, which agreed earlier this month to be bought by SAP, BEA was frequently touted by Wall Street as one of the software field's most attractive takeover candidates.

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Oracle, which had threatened to walk away from its BEA offer if BEA did not accept or put the matter up to a shareholder vote by Sunday, did not immediately respond to the BEA board's $21 per share valuation announcement.

History suggests it will be willing to negotiate: Oracle adjusted its initial $19.50 per-share bid for PeopleSoft several times before eventually buying the company for $26.50 per share, and it outbid SAP in a tug-of-war over retail analytics technology maker Retek. Oracle eventually won control of Retek for $11.25 per share, up from the $9 per share it first offered.