Oracle warns BEA it won't wait forever

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

In announcing the deadline, Oracle said 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.

Oracle said in a letter to BEA directors: "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 9 October proposal."

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 17:00(PDT).

Oracle stated in its letter: "Oracle believes that our $17 per share price is generous and there are no offers for BEA above $17 per share." It goes on to note that its offer represents a 21 per cent 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 $6.7bn.

The company stated in its response letter: "Despite your statement that Oracle will withdraw its proposal, we simply cannot accept an offer that seriously undervalues BEA. 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 three per cent in early-morning trading to $17.98 per 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 sceptical another suitor exists for BEA and said Oracle's letter to the board is a shot across the bow to get the company to the negotiating table.

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

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 said. 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.

Dawn Kawamoto writes for CNET News.com