Oracle Sends Second Letter to BEA

Oracle urges the BEA board to let shareholders decide the company's fate and imposes an Oct. 28 deadline to deal.

Oracle is giving BEA Systems another shot at being acquired.

Oracle delivered a letter to BEAs board of directors Oct. 22 pleading with the directors to let BEAs shareholders determine its fate. Oracle requested that BEAs board sign its letter of acquisition to buy BEA—for $17 per share, or about $6.6 billion—and then put the offer to a vote by BEAs owners.

Oracle delivered its first letter to BEA Oct. 12, submitting an offer of intent to acquire the company. BEA responded with its own letter declining Oracles offer.

"Oracle believes that our $17 per share price is generous and there are no offers for BEA above $17 per share," reads Oracles Oct. 22 letter. "Despite BEAs contention that BEA is worth substantially more than Oracle is offering, Oracle points out that the offer is a 21 percent premium to BEAs closing price of $14.05 on the date Oracle made its proposal."

Officials with Oracle, of Redwood Shores, Calif., said in its letter that BEAs board has refused to meet with Oracle since the company made its Oct. 9 proposal, which was announced three days later.

The issue, according to San Jose, Calif.-based BEA, is that the company has been unable to state its earnings since 2006 due to a stock option snafu. Because of that, the real value of BEA isnt clear to the public, or to Oracle.


Click here to read more about BEAs response to Oracle.

"It is apparent to our Board…that BEA is worth substantially more to Oracle, to others and, importantly, to our shareholders than the price indicated in your letter," reads BEAs letter to Oracle declining its offer. "As we have indicated to you previously, we believe that the absence of current financial information in the public markets limits investor visibility into our performance. We expect that this will be corrected in the near future when we become current on our SEC filings, and can communicate more fully with the investment community."

Oracle has learned its lesson from past experience. In 2003, the company made a hostile takeover bid for PeopleSoft—an unprecedented move in the software industry—and followed through a lengthy, acrid takeover battle that included a threatened proxy battle with PeopleSofts board, lawsuits on both sides, poison pill provisions and a trial brought by the Department of Justice trying to stop the deal.

In the end, Oracle prevailed. While its done a good job of winning over skittish PeopleSoft customers, some cracks in the surface are starting to appear. Oracle lost top applications developer John Wookey earlier this month, leading to rumors that the companys Fusion Applications project would be delayed beyond its planned delivery date of 2008. The bid for BEA has thrown Oracles Fusion plans into further disarray.

But in the Oct. 22 letter to BEA, Oracle has drawn a line in the sand. "Oracle has no interest in a long, drawn-out process to acquire BEA," reads the letter. Oracle further says that its offer will expire Oct. 28 if the BEA board refuses to sign the acquisition agreement and let the shareholders vote on the deal.

Since Oracles initial offer, its been speculated that other companies would step in as a white knight and bid for BEA, saving it from Oracles clutches. Those offers have yet to surface.


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