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BEA sets "impossibly high" price tag
$8.2bn? You must be kidding, says Oracle...

By Reuters

Published: Friday 26 October 2007

BEA Systems said it is willing to sell itself for $8.2bn but the price was rejected as "impossibly high" by Oracle, the only company that has publicly expressed interest in the software maker.

BEA, which is under pressure from billionaire investor Carl Icahn to find a buyer, said it was worth $21 per share, which is a 24 per cent premium to the $17-per-share bid that Oracle offered on 12 October.

Oracle said BEA's price represented an 80 per cent premium to its shares before activist shareholders started pushing for a sale of the company, and nearly 11 times BEA's revenue from software maintenance services in the last 12 months.

Oracle president Charles Phillips said in a letter to BEA's board: "Nobody would seriously consider paying that kind of multiple for a software company with shrinking new licence sales."

He said Oracle was standing by its $6.7bn bid, which expires at 17:00(PDT) on Sunday, adding "at which time Oracle will move on and evaluate other potential acquisitions".

Shares of BEA had closed at $17.53 on the Nasdaq, down 2 cents as investors appeared to also believe that the $21 price set by the business software maker may be too optimistic. Some analysts still thought a deal is possible as BEA's software, which is called middleware because it helps connect business computer systems, could be added to Oracle's database programs to help it better compete with SAP.

Bart Narter, an analyst with financial research and consulting company Celent, said: "Nobody is more interested in this than Oracle. I think there is a lot of posturing. Maybe they'll get a little higher price. Maybe."

Representatives for BEA could not be reached for comment. The $21 price had marked the first time BEA gave a price point for negotiations with Oracle, the world's third largest software company with a market value of about $100bn.

BEA's board said the company is "prepared to authorise negotiations with third parties including Oracle at a price of $21.00 per share".

Talk of a buyout for BEA began in August when Icahn said he had begun acquiring shares in the business software maker and called on its board to put the company up for sale. Chief executive Alfred Chuang had rebuffed the billionaire activist investor, who boosted his stake to about 13 per cent, making him the company's biggest shareholder.

Besides Oracle, other companies that have been touted as possible buyers of BEA include HP, IBM and SAP.

An SAP spokesman said the company was not interested in buying BEA, while representatives for HP and IBM declined comment. Icahn could not be reached for comment.

BEA said that after consulting with its investment bank, Goldman Sachs, it believes Oracle or another company would still see profits benefit if it paid $21 per share or higher.

But Oracle's Phillips said in his letter: "We believe that your counterproposal at $21 per share price is an impossibly high price for Oracle or any other potential acquirer."