BEA invites Oracle to bargaining table

Oracle turned up the heat under BEA earlier this week by saying its $17 per share offer will expire Sunday if BEA does not agree to a deal or put the bid to a shareholder vote. BEA responded to the threat Thursday by saying it is willing to negotiate with potential acquirers, including Oracle, but at $21 a share.

BEA's board said in a statement it continues to believe that Oracle's bid "significantly undervalues BEA, and is therefore not in the best interests of BEA shareholders."

The $21 per share valuation, the board said, was generated after consulting with its financial adviser, Goldman, Sachs & Co. The board added that "based on analyst estimates of synergies in prior acquisitions by Oracle" and other software makers, it believes a buyer of BEA "could achieve earnings accretion in a BEA acquisition at levels well in excess of $21 per share."

The $21 per share price values BEA at about $8.15 billion, based on its roughly 388.2 million outstanding shares as of April 2006. Oracle's offer values BEA at about $6.7 billion.

BEA has been under pressure from investor Carl Icahn, who owns a 13.2% stake, to consider a sale. His initial reaction to the Oracle bid was that he was happy with the offer but would like to see "a better price." So would BEA.

The San Jose, Calif., company says it has an "exceptionally strong balance sheet" with more than $1 billion in cash and no debt.

BEA makes software that supports business activities such as billing, supply chain management and securities trading by communicating between those programs and back-end systems such as databases. Such business software has been in high demand as companies move more of their tasks onto the Web, but competition has held down prices.

In a letter Tuesday to BEA's board, Oracle president Charles Phillips urged the board to put Oracle's offer to a vote by shareholders and said his company "has no interest in a long, drawn-out process to acquire BEA."

Speculation about an Oracle-BEA merger has circulated for years, but escalated earlier this month when Oracle's nemesis, Germany's SAP AG, bid $6.8 billion for France's Business Objects SA.

BEA founder and chief executive Alfred Chuang has been loath to sell the company, but increased competition and pressure from shareholders may necessitate a sale.

Shares of BEA opened at $17.94 and traded at $17.77 by midmorning. The stock closed Wednesday at $17.55.