BEA Systems rejects bid from software rival Oracle
SAN FRANCISCO (AFP) — Software giant Oracle said Friday it had bid 6.68 billion dollars for BEA Systems, an offer that was swiftly rejected by the rival business software group as too low.
Hours after the proposed tie-up was announced for the two California-based firms, BEA said its board concluded that the offer "significantly under-values BEA Systems."
BEA said in a statement that even though the offer represents a premium to the latest share price, the company "is worth substantially more to Oracle, to others and, importantly, to our shareholders than the price indicated in your letter."
It said the recent low share price reflects "the absence of current financial information in the public (which) limits investor visibility into our performance" and that "we expect that this will be corrected in the near future."
The deal comes as Oracle, the world's number two software firm keeps up its battle against German rival SAP, which earlier this month announced a deal for French software maker Business Objects for 4.8 billion euros (6.8 billion dollars).
Some analysts say the offer for BEA may spark a bidding war.
The price of 17 dollars a share would be a 25 percent premium to the most recent closing price of BEA, which is based in San Jose, California.
"We have made a serious proposal including a substantial premium for BEA," said Oracle president Charles Phillips.
"We believe our all cash offer provides the best value for BEA's shareholders and the best home for BEA's employees and customers. This proposal is the culmination of repeated conversations with BEA's management over the last several years. We look forward to completing a friendly transaction as soon as possible."
Trip Chowdhry at California-based Global Equities Research said he believes there are "multiple bids" in play, possibly from SAP but also from Hewlett-Packard.
"This all info is based on chatter we hear in Silicon Valley," he said.
Chowdhry said a counterbid from SAP is likely and that the German firm is in a "fight for survival" in the sector.
"If SAP loses BEA, probably then SAP will be on block to sell itself," he added.
Laura Lederman, analyst at William Blair & Co. said she believes "only one vendor might make a counteroffer, HP."
Lederman said in a research note that SAP "is very unlikely to make a counteroffer" because it is still absorbing two other big acquisitions.
"We also do not expect IBM to make an offer since it already has one of the top application servers and would be more inclined to buy where it does not have a product," she added.
Oracle and SAP have been going head-to-head in competition for software to help companies carry out a variety of tasks, such as managing sales and tracking financial and inventory data.
The US firm outmaneuvered SAP in 2004 to buy rival firm PeopleSoft and then outbid the German group a year later for another software maker, Retek.
Oracle has sued SAP alleging it looted Oracle's software libraries to gain a competitive advantage. A trial is set for 2009 in California.
Meanwhile BEA has been under pressure from investor Carl Icahn, who holds a 13 percent stake, to make a move to increase value for shareholders of the struggling company.
BEA shares surged 38 percent to 18.82 dollars, indicating the market believes the price will be hiked above the 17 dollars in the Oracle offer. Oracle shares fell 0.09 percent to 22.44 dollars and SAP's US-traded shares increased 1.9 percent to 55.85.
Kimberly DuBord at Briefing.com said the actions suggests "market participants anticipate the deal could be sweetened or possibly another bidder steps in."
"Other stocks in the space like Cognos and MicroStrategy are likely to garner interest, as the consolidation within the software industry continues as we have long anticipated," she added.
