October 23, 2007 6:25 AM PDT

Oracle sets deadline for BEA offer

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Oracle has warned BEA Systems that its $6.7 billion buyout offer will expire Sunday, unless the middleware company agrees to put its offer before shareholders for a vote.

In announcing the deadline, Oracle said Tuesday it has no interest in a protracted fight to acquire BEA and noted that no other suitors have stepped forward to bid for the company above Oracle's offer price.

"Last night we were told by Bill Klein, vice president-business planning and development (speaking on behalf of the board), that BEA's board again rejected our proposed price of $17 per share in cash. The board has refused to meet with us since we made our October 9th proposal," Oracle said in a letter to BEA directors.

Oracle urged the middleware company to sign a merger agreement and allow BEA shareholders to vote on the deal. The deadline for BEA to accept the buyout offer is Sunday at 5 p.m. PDT.

"Oracle believes that our $17 per share price is generous and there are no offers for BEA above $17 per share," Oracle stated in its letter. It goes on to note that its offer represents a 21 percent premium over BEA's closing price prior to the announcement of the buyout offer.

But BEA contends Oracle's $17 per-share offer undervalues the company and said it is willing to negotiate should Oracle "propose a reasonable price." The value of the cash deal currently stands at $6.7 billion.

"Despite your statement that Oracle will withdraw its proposal, we simply cannot accept an offer that seriously undervalues BEA," the company stated in its response letter. "BEA's board has not indicated that it would be opposed to a transaction that appropriately reflects BEA's value, reached through a reasonable process. To the contrary, the board is keenly aware of its fiduciary duties to shareholders and is acting accordingly."

Shares of BEA edged down 3 percent in early-morning trading to $17.98 a share.

Since Oracle announced its offer less than two weeks ago, BEA's shares have been trading in the $18 range, as investors anticipated another suitor stepping into the ring--or a higher bid from Oracle.

One analyst said he's skeptical that another suitor exists for BEA and that Oracle's letter to the board is a shot across the bow to get the company to the negotiating table.

"If they get them to the table, then maybe the price will move up from there," said Brendan Barnicle, an analyst with Pacific Crest Securities.

Oracle is no stranger to hostile-takeover battles, after waging an 18-month proxy fight to acquire PeopleSoft in 2004, a campaign that included a legal tangle with antitrust regulators who opposed the deal.

Because of the additional expense and time it takes to wage a proxy fight, Oracle may be loath to launch such an effort with BEA, Barnicle noted. BEA, meanwhile, has previously indicated that it does not want a lengthy negotiation for fear of creating uncertainty among its customers and sharing sensitive financial information with its competitor.

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BEA Systems Inc., middleware company, Oracle Corp., suitor, middleware

 

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