Oracle: 'Any fresh BEA bid would be lower'

16-11-2007

by Silicon.com

If Oracle renews its bid for rival BEA Systems, it would be at a price below its initial offer of USD17 a share, the company has said.

Larry Ellison, Oracle's CEO, said the initial USD6.7 billion -- or USD17 per share -- offer for BEA seems overpriced these days.

Ellison said: "If we made another offer, the price would be lower, they have done enough things now... and we'll have to see all the data... that clearly, the USD17 price seems too high now."

Two weeks ago, BEA's board approved a change-in-control severance plan that covers all full-time employees and part-time employees who work 20 hours or more per week, according to a filing with the US Securities and Exchange Commission.

The plan, which calls for a lump sum payment of three months to one year of severance for employees who are terminated within a year after a merger, could drive up the costs for a potential acquirer.

Oracle had withdrawn its buyout offer late last month, after BEA rejected it, citing a desire for a USD21 buyout offer from Oracle, or any third-party, to start negotiations.

Ellison said: "If their goal was to stay independent, they are doing a good job. We were the only buyer then and I think what they will succeed in doing is going from one buyer to none."

Shares of BEA fell 3 percent to USD16.87, in early-morning trading, after having closed at USD17.40 on Wednesday.

Ellison also noted that Oracle's middleware business is growing rapidly on its own.

A BEA acquisition would help Oracle achieve its scale faster, rather than taking the slower process of trying to woo over BEAs customers to its middleware.

Ellison said: "The reasons we wanted BEA had nothing to do with [its] technology. It had everything to do with scaling up."

He added by gaining economies of scale, Oracle could "make a lot of money" and a buyout of BEA at USD17 per share would greatly add to its profits.

While BEA holds out for a higher price, it has yet to be seen whether Carl Icahn, BEA's largest shareholder, holds a similar view on the company's valuation estimate.

Two weeks ago, BEA shared its non-public financial information with Icahn in an effort to convince him that Oracle's offer of USD17 undervalued the company. Icahn, who initially demanded BEA accept the highest bid it receives and filed a lawsuit to force a BEA shareholder meeting, has remained quiet since reviewing the financials.

Dawn Kawamoto writes for CNET News.com.

Reprinted with permission from Silicon.com