October 26, 2007 8:31 AM PDT
BEA plans to let Oracle buyout offer expire
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BEA reiterated its stance that Oracle's buyout offer of $17 a share is too low for the enterprise software middleware maker and it's willing to let the proposal expire, when Oracle's deadline rolls around at 5 p.m. PDT on Sunday.
BEA's decision comes a day after it set a price of $21 a share for Oracle, or any interested parties, to begin buyout talks. Oracle, however, balked at that prospect and stood firm at its offer of $17 a share, noting no other buyers have publicly come forward for BEA.
Nonetheless, BEA said it's prepared to keep the door shut to negotiations.
"As we have stated repeatedly, your $17 per share proposal is unacceptable to the board of directors of BEA Systems. As fiduciaries, our board cannot endorse a proposal that it has concluded significantly undervalues BEA. We therefore assume that your proposal will expire on October 28," according to a letter BEA faxed to Oracle on Friday morning.
The latest developments between the two rivals apparently have shaken investors' confidence that a deal will get done. In Friday morning trading on the Nasdaq, shares of BEA fell more than 4 percent to $16.77 a share, below Oracle's offer price.
That's in stark contrast to investor sentiment after Oracle announced its $17 a share buyout bid on October 12. At that time, BEA shares soared 38 percent to close at $18.82, indicating investors expected a bidding war to ensue, or that Oracle would ultimately pay more after negotiations began with BEA.
BEA's shares have largely traded in the $18 to high $17 a share range over the past two weeks, since Oracle put an offer on the table. Previously, BEA's shares have traded in the $12 to $14 range since the start of the year.
Analysts, however, have speculated that Oracle may let BEA's shares settle back to the level they were trading prior to its buyout offer, then take another run at the company.
"They did that with PeopleSoft," noted Charles Di Bona, an analyst with Sanford Bernstein.
Oracle launched a $5.1 billion hostile takeover attempt for PeopleSoft in 2003, offering to pay $16 a share for the software applications maker. Eventually, after several rounds of upping its offer price over the course of the 18-month saga, Oracle and PeopleSoft struck a deal at $26.50 a share.
In the BEA case, however, Oracle said it wants to avoid a protracted battle, sending a signal it would likely stay clear of a proxy fight.
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