News Blog

Oracle announced Wednesday it has received a green light from regulators to move forward on its merger plans with BEA Systems.

For Oracle, the early termination of the antitrust review may just be the easiest part of the process it has undergone since launching its buyout bid for BEA in October.

Oracle's unsolicited buyout bid of $17 a share was by BEA, which claimed it undervalued the company. The companies threw barbs back and forth, until BEA ultimately signed aboard, under pressure from its largest shareholder Carl Icahn.

The Federal Trade Commission and the U.S. Department of Justice have given the deal the green light. BEA's investors will have a chance to vote at a special shareholders meeting on April 4, marking the last hurdle for the deal.

Has your tech company played coy with a potential suitor lately? You may want to rethink your reaction.

In the past four months, Oracle, Microsoft, and Electronic Arts have all launched high-profile, unsolicited buyout bids for reluctant targets. Such efforts are otherwise known as bear hugs.

Oracle put the squeeze on middleware competitor BEA Systems in October; Microsoft did likewise with Yahoo at the start of this month; and on Sunday, EA made a play for rival game publisher Take-Two Interactive Software.

Did someone forget to put the lid back on the honey jar?

In the case of Oracle, it was ultimately successful in forcing BEA Systems down the merger aisle after a three-month chase around the kitchen table and no white knight to intervene. Sure, a couple potential suitors talked of coming to the rescue, but ultimately none of them saddled up.

And like a Hollywood movie that's been recast with a tweak, a virtual rerun is unfolding with the Yahoo's efforts to fend off Microsoft. There's talk of News Corp. or AOL stepping in to offer aid, but odds makers give those prospects a long-shot.

But what really serves as the common thread among Oracle/BEA, Microsoft/Yahoo, and now EA/Take-Two is that the parties had previously expressed an interest in acquiring the target companies from as early as a year before starting a bear hug.

So, dust off your calendar. Who's gently knocked on your company's door in the past year about a potential merger? You might want to stash the honey jar and hire some bear trackers.

As Microsoft makes a buyout play for a reluctant Yahoo, the software giant may want to enlist the help of billionaire investor Carl Icahn.

The shareholder activist apparently played matchmaker extraordinaire in Oracle's $8.5 billion buyout bid for BEA Systems, according to BEA Systems' Securities and Exchange Commission filing on Thursday.

Carl Icahn

The SEC filing, which provides a behind-the-scenes look at the merger, not only gives a glimpse of Icahn's active matchmaking role between Oracle and BEA, but also the middleware software maker's efforts to find other suitors.

For those who were wondering whether there was ever anyone else except Oracle who was interested in doing something with BEA, the answer is a sort of "yes," according to the filing:

Between the time Oracle made its initial $17-a-share offer in October and through January, when BEA agreed to Oracle's higher offer, the list of potential interested "strategic partners" dropped from three to none.

"From time to time during the period from October 2007 until January 2008, BEA and its advisors held exploratory discussions with ten potential strategic partners regarding a possible transaction with BEA. These exploratory conversations led to in-person meetings between management of BEA and three potential strategic partners," BEA said in its filing. "By early January of 2008, of the three potential strategic partners with whom BEA had in-person meetings since October 2007, two had indicated they did not wish to continue discussions. The one potential strategic partner with whom conversations were ongoing expressed an interest in a possible strategic investment or commercial agreement, but stated that it was unwilling to contemplate an acquisition of BEA in the near term."

Meanwhile, Icahn was standing by and pushing BEA to the dance floor, where Oracle was ready to do the waltz.

BEA, after initially rejecting Oracle's $17-a-share offer because it undervalued the company, had a discussion the following day with its advisors to figure out the right value that would be needed to kick off talks, according to the filing. And Icahn played a big role in prompting such action, according to the filing.

"On October 24, 2007, at the direction of the board, representatives of Goldman Sachs had discussions with Mr. Icahn and certain of his associates, in which Mr. Icahn recommended that the BEA board of directors exempt Oracle's $17-per-share offer from BEA's stockholder rights plan if the offer were supported by a majority of the shares. Mr. Icahn also stated that he intended to make a public announcement the following day regarding his recommendation.

"The BEA board of directors met telephonically and representatives of Goldman Sachs described the conversations that had occurred between them and Mr. Icahn. Representatives of Goldman Sachs stated to the board that they and BEA's other advisors had discussed Mr. Icahn's recommendation and statement that he would make a public announcement, and recommended to the board that it consider whether it should make an announcement that evening regarding the price at which the board would be prepared to discuss a sale of BEA.

"Discussion ensued regarding financial analyses, synergies expected by BEA's management to be achievable with various acquirers, other strategic options and related matters, and after thorough consideration and discussion, the board unanimously determined that it would be prepared to discuss the sale of BEA at a price of $21.00 in cash per share."

Roughly two weeks later, BEA announced it entered into a confidentiality agreement with Icahn, in which BEA's largest investor would be able to review certain financial data of the company. BEA's chief executive, Alfred Chuang, also addressed with Icahn such topics as BEA's strategic options and tactical issues.

That apparently wasn't lost on Oracle's president, Charles Phillips. The next day, Phillips was on the phone with Icahn.

"On November 7, 2007, Mr. Phillips telephoned Mr. Klein to discuss the nondisclosure agreement BEA had entered with Mr. Icahn and inquired how to recommence discussions with BEA regarding an acquisition. Mr. Klein reiterated the board's conclusion that the $17 proposal substantially undervalued BEA and that it was prepared to authorize negotiations at $21 per share on reasonable and customary terms. "

Towards the end of November, Icahn offered his New York offices as a meeting place for Oracle and BEA, with the hope of the two companies could "move forward toward an acceptable transaction."

But BEA said thanks, but no thanks. Instead, they asked Oracle to prepare a markup of a proposed merger agreement and send it to their attorneys.

While that was underway, Icahn had not been idle.

"On January 11, 2008, Mr. Icahn called a representative of Goldman Sachs and conveyed that, as a result of the discussions and negotiations that had occurred between Mr. Icahn and Oracle, Oracle would be prepared to pay $19.375 per BEA share and to include a $500 million reverse termination fee in the event regulatory approval was not received. Based on those terms, Mr. Icahn stated that he would agree to vote in favor of a transaction, and that he would be prepared to announce publicly his support of such an offer by Oracle."

Five days later, BEA Systems announces its merger with Oracle.

And the sales price? $19.375 per share.

For anyone who's ever listened to Oracle founder Larry Ellison talk about his company, or on any topic for that matter, it can be entertaining. The dude is humorous, has great punch-line timing, and at times will make outlandish comments that send his public relations team into major damage control.

So, it was painful to listen in on the company's audio Webcast (registration required) announcing its $8.5 billion acquisition of BEA Systems.

The tightly scripted press conference, which had Ellison reading off a piece a paper, conjured up images of a tiger in a tight cage. His comments, which generally flow fast and freely, were so plodding in the press conference that occasionally he stumbled over his words, and, at one point, said "let me try that again" as he took another stab at reading off the script.

Alfred Chuang, BEA's co-founder and CEO, followed up Ellison's presentation, sounding comfortable with the task of reading off a script. And, in his relaxed tone, he wrapped up his comments with: "And back to you, Larry."

But Larry was gone.

He had left the proverbial building.

It almost makes one wonder whether BEA had negotiated the uncharacteristically scripted press conference as part of its buyout agreement.

BEA Systems rolled out a slew of announcements Wednesday and, no, none of them had to do with Oracle's efforts to acquire the company, or BEA's largest shareholder Carl Icahn raising a stink about its lackluster share price.

Rather, the company unveiled its BEA AquaLogic Enterprise Security 3.0, its new WebLogic Event Server tools to support Eclipse's open-source environment, and announced its BEA Guardian will be offered free of charge.

BEA's AquaLogic Enterprise Security 3.0 is designed to dish up new security service modules to aid customers' ability to secure application integrations, business processes, a range of application environments and corporate data stored in relational databases. BEA plans to make the 3.0 version generally available on Friday.

The middleware vendor also rolled out its Eclipse-based tooling support for BEA WebLogic Event Server users. The tools aim to enable Eclipse developers to quickly code, test, and deploy service-oriented architecture services and applications geared toward processing numerous data streams, using rules to detect patterns and characteristics in the data.

BEA is not only offering up its BEA Guardian for free, but also will do likewise when its BEA Guardian 1.1 version makes its debut in the spring. BEA Guardian is designed to scan application servers and remove potential incompatibilities before they occur. In the next version, 1.1, BEA will also bundle the software in with its upcoming WebLogic Server releases.

BEA Systems investors apparently still hold the faith that a buyout deal will go through--whether it's with Oracle is another matter.

On a day when Wall Street took a hammering, with the Dow Jones falling a sharp 360 points to 13,300.02, BEA's stock rose 1.18 percent to close at $17.08 a share.

At that price, BEA's stock is back to the level it was trading when Oracle yanked its $17-a-share buyout price off the table a little over a week ago.

Previously, the stock sunk to $16.50 a share post-Oracle-pullout and kissed the $17 mark a few times since then. But Wednesday, it closed beyond Oracle's former offer price.

While it cools its heels waiting for a response from BEA Systems, Oracle is moving forward with other acquisitions.

The database and enterprise applications software maker announced Wednesday it plans to snap up Interlace Systems, which develops operational planning software. The deal aims to bolster Oracle's Enterprise Performance Management System by integrating Interlace's software that's designed to help companies re-evaluate scenarios across various functions, change operational assumptions and evaluate the effect on their business.

The deal is expected to close next month, which is in contrast to Oracle's efforts to acquire BEA.

Oracle on Tuesday announced it issued a deadline to BEA. By sundown Sunday, BEA needs to invite Oracle and its $17-a-share buyout bid to the negotiating table. Otherwise, the deal disappears.

And while Oracle would not disclose the financial terms in the Interlace deal, it's looking to lay down $6.7 billion for BEA.

BEA Systems yesterday entered the final phase of capitulation to Oracle, throwing out a "but we're worth so much more than $17 per share!" counter to Oracle's offer.

Most acquiring companies would take mercy on the desperate gesture of BEA at this point, but Oracle might very well hold out.

Oracle is the sort of company to drag the companies it woos through a bit of hell and humiliation to make them good and desperate to be acquired at its price. This is very likely what will happen with BEA.

In other words, BEA's plea for more money will probably result in the opposite: an even lower offer a year from now, after BEA's public subjugation to Oracle is complete. Oracle is demanding an answer by this Sunday, but it can afford to wait much longer on the response it wants.

In the meantime, BEA will flounder, just as PeopleSoft did before it.

SAP has no plans to follow Oracle down the megamerger path.

That, apparently, is the sentiment of Henning Kagermann, SAP's chief executive, who played down the prospect that the German enterprise software maker would make a bid for middleware maker BEA Systems, according to a report in the Financial Times.

The lithe Kagermann wants to stay focused on acquisitions to push SAP into new markets, such as its mega billion-dollar acquisition of Business Objects, whereas a bid for BEA would only bulk up its presence in the middleware market. He indicated that SAP archrival Oracle can make its play for BEA, undisturbed.

Kagermann apparently is not blowing after-dinner smoke. He has not approached SAP's supervisory board about clearing the table for yet another megadeal, a source told CNET News.com.

Meanwhile, back at the BEA ranch, Oracle President Charles Phillips kicked up some dust when he complained of BEA canceling a meeting set for last Friday, which was allegedly designed to lead to a deal announcement for Monday. BEA rejected Oracle's $17-a-share cash offer as too low.

One BEA source noted that the middleware maker has publicly refuted Phillips' characterization of a planned "meeting," but that despite the craziness of Oracle's claims, BEA would take a look at any other bids its rival passes its way. After all, BEA is a publicly traded company, so it has an obligation to deliver the best bang for the buck to its shareholders.

Talk of rival bids other than from SAP have also surfaced, such as ones from IBM and Hewlett-Packard. But IBM has its own middleware deal with WebSphere that rivals BEA's WebLogic. And HP took a hit on its acquisition of Bluestone Software for $467 million in 2000. Two years later, it exited the middleware market, with plans to partner with BEA and Microsoft.

So with Oracle's offer still standing at $17 a share in cash for BEA, a watchful eye is on the horizon for a bigger offer from Oracle--or a rival bid.